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    WWW - Edutap.co - In: Bills of Exchange Accounting Treatment For Bills of Exchange

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    shaifali pandey
    This document discusses the accounting treatment for bills of exchange between a creditor and debtor. There are three scenarios for the creditor: 1) retaining the bill until maturity, 2) discounting the bill with a bank before maturity, or 3) endorsing the bill to another creditor. The accounting entries are the same for the debtor regardless of the scenario. The document provides examples of journal entries for the creditor and debtor under each scenario.

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    WWW - Edutap.co - In: Bills of Exchange Accounting Treatment For Bills of Exchange

    Uploaded by

    shaifali pandey
    25 views20 pages
    This document discusses the accounting treatment for bills of exchange between a creditor and debtor. There are three scenarios for the creditor: 1) retaining the bill until maturity, 2) discounting the bill with a bank before maturity, or 3) endorsing the bill to another creditor. The accounting entries are the same for the debtor regardless of the scenario. The document provides examples of journal entries for the creditor and debtor under each scenario.

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    This document discusses the accounting treatment for bills of exchange between a creditor and debtor. There are three scenarios for the creditor: 1) retaining the bill until maturity, 2) discounting the bill with a bank before maturity, or 3) endorsing the bill to another creditor. The accounting entries are the same for the debtor regardless of the scenario. The document provides examples of journal entries for the creditor and debtor under each scenario.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    25 views20 pages

    WWW - Edutap.co - In: Bills of Exchange Accounting Treatment For Bills of Exchange

    Uploaded by

    shaifali pandey
    This document discusses the accounting treatment for bills of exchange between a creditor and debtor. There are three scenarios for the creditor: 1) retaining the bill until maturity, 2) discounting the bill with a bank before maturity, or 3) endorsing the bill to another creditor. The accounting entries are the same for the debtor regardless of the scenario. The document provides examples of journal entries for the creditor and debtor under each scenario.

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    Bills of Exchange

    Accounting Treatment for Bills of Exchange

    www.edutap.co.in
    Accounting Treatment for Bills of Exchange

    Bill of Exchange

    Ram
    Sham

    Drawer Drawee

    Creditor Debtor

    Bills Bills Payable


    Receivable
    Accounting Treatment for Bills of Exchange

    Books of Creditor Books of Debtor


    Accounting Treatment for Bills of Exchange

    Books of Creditor

    3 Scenarios

    Creditor Retains the Bill till Maturity

    Creditor can get the bill discounted from the bank

    Creditor can endorse the bill in favor of his Creditor


    Accounting Treatment for Bills of Exchange

    Creditor Retains the Bill till Maturity

    2 Scenarios

    Collects on date of maturity


    Collects Through the bank
    directly

    Few Days Before


    Maturity, bill is sent for
    collection tot bank
    Accounting Treatment

    Books of Creditor

    3 Scenarios

    Creditor Retains the Bill till Maturity

    Creditor can get the bill discounted from the bank

    Creditor can endorse the bill in favor of his Creditor


    Accounting Treatment

    Creditor can get the bill discounted from the bank

    On Maturity, Accounts of creditor


    will not be impacted as Creditor
    has already kind of sold it to the
    bank
    Accounting Treatment

    Books of Creditor

    3 Scenarios

    Creditor Retains the Bill till Maturity

    Creditor can get the bill discounted from the bank

    Creditor can endorse the bill in favor of his Creditor


    Accounting Treatment

    Creditor can endorse the bill in favor of his Creditor

    On Maturity, Accounts of creditor


    will not be impacted as Creditor has
    already transferred it to other party
    Accounting Treatment

    Books of Creditor Books of Debtor


    Accounting Treatment

    Books of Debtor

    Makes no difference whether the bill is retained till Maturity, discounted or endorsed
    Example 1

    Solution – (i) – Creditor (Amit) Books

    Rules
    Example 1

    Solution – (ii) – Creditor (Amit) Books

    Rules

    Working Notes - > 12% for 12 months -> 3 % for 3 months


    3% of 20,000 = 600
    Example 1

    Solution – (iii) – Creditor (Amit) Books

    Rules
    Example

    Solution – (iv) – Creditor (Amit) Books

    Rules
    Example 1

    Solution – (All parts) – Debtor (Sumit) Books

    Rules
    Example 2

    Solution – Creditor Ramesh Books


    Example 2

    Solution – Debtor Deepak Books


    Example 2

    Solution – Poonam Books


    Next Video – Dishonor of Bill and Retirement of Bill, Renewal of Bill and Accomodation of Bill

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