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BILLS OF EXCHANGE, →, →, →, →, , B.E. is an instrument in writing, Containing an unconditional order Signed by the maker,, Directing a certain person, to pay a certain sum of money., To the order of a certain person or to the bearer to the instrument., , Features of BILLS OF EXCHANGE, 1., , Must be in writing, , 2. Contain an order to pay., 3. Order must be unconditional., 4. Must be dated., 5. Must be paid in money only, 6. Amount must be certain., 7. Party must be certain., 8. Must be properly stamped., 9. All parties must be specified i.e. Drawer, Drawee & Payee, Parties involved :➢ Drawer- who draws the bill (Creditor) - seller of goods., ➢ Drawee- who accepts the bill (Debtor) - buyer of goods., ➢ Payee- receiver of money of Bills of Exchange.(Drawer & Payee may be same person or different), ❖ Calculation of due date of, bills of exchange, Meaning of maturity: date on which holder of bills of exchange will receive the amount against such, negotiable instruments., Days of grace: In calculating the maturity of Bills of exchange……, •, , 3 days of grace shall be added to the date on which the instrument is expressed to be payable,, i.e., due date., Due Date = Maturity date + 3 days of grace, , Instruments entitled to Days of grace:, → A Bill payable on a specified date- say, bill payable on 10th November., → A Bill payable after sight- means counting of days / month’s starts after the acceptance of bill., → A Bill payable after date - means counting of days / month will start from date of drawing., When there are bills of exchange we must remember following public holidays :➢ 15th August, Independence Day, ➢, , 26th January, , Republic Day, , ➢, , 2nd October, , Gandhi Jayanti, , Accountancy by DHRUV GARG (9818552878) / AKASH ACADEMY (9910913871), , 1
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➢, , 1st May, , Labour day, , ➢, , 25th December, , Christmas Day, , ➢, , 30th September, , Half yearly closing, , ➢, , 01st April, , Annual closing, , ❖ Calculation of due date: (Examples), Date of bill:, , 31- January- 2019, , 31- Jan-2020, , 31- Aug-2020, , 31-Jan-2020, , Duration:, , 1 month, , 1 month, , 1 month, , 3 month, , Maturity date:, , 31/02/19, , 31/02/20, , 31/09/20, , 31/04/20, , Due date:, , 03/03/19, , 03/03/20, , 03/10/20, , 03/05/20, , Date of bill:, , 31- January- 2019, , 24- Dec-2019, , 29- June-2020, , 29-Jan-2020, , Duration:, , 30 days, , 30 days, , 3 months, , 2 months, , Maturity date:, , 02/03/19, , 23/01/20, , 29/09/20, , 29/03/20, , Due date:, , 05/03/19, , 26/01/20, , 02/10/20, , 01/04/20, , same, , 25/01/20, , 01/10/20, , 31/03/20, , NA, , Republic Day, , Gandhi Jayanti, , Bank Annual A/c, , Actual due date:, Reason:, , {i.e., 1 day before }, , ❖, , {i.e., 1 day later}, , ❖, , * Possible ways to deal with bills of exchange / promissory notes *, Retain till due date: Holder of negotiable instrument can retain such bill till the due date, the, bills of exchange will be presented for payment by the drawer itself /, Drawee of promissory note., Discounting with bank: Drawer of bills of exchange/ payee of promissory not can be discount, the bills of exchange with the bank., (It’s a financial instrument and can be used for short tern liquidity), Endorsement: Holder of bills of exchange / promissory note can endorse the bill in favour of, their creditors against their current liability. Person who endorse the bill is, known as endorser and to whom bill is endorsed is known as endorsee., Sent for Collection to bank: For safety purpose, The driver may deposit the bills of exchange, with his bank with clear instruction that the bills of exchange, should be retained till due, and should be realised on the due date., Here there is no discounting, only deposit of the bill with bank., (For this service bank charge commission ), , Accountancy by DHRUV GARG (9818552878) / AKASH ACADEMY (9910913871), , 2
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* JOURNAL ENTRIES *, ( ये वाली Transactions तो हर Ques में same ही होगी। जब भी Question में Goods sold की बात की गयी होगी & Bill of, exchange के acceptance की बात की गयी होगी I ), ▪ Eg:- When goods sold by Kachra seth (Seller) to Raju (purchaser) on credit & Kachra seth (Creditor), drew a bill on Raju (Debtor) for 3 months, to which Raju immediately gives his acceptance., Date, , In the books of, , In the books of Raju, , Kachra seth, Date of, goods sold, , Raju’s (Debtor) A/c ……Dr, To Sales A/c, , Purchase A/c, ……Dr, To Kachra seth (Creditor) A/c, , (Being goods sold to raju on credit), , (Being goods purchased from Kachra seth on, credit), , Date of Bill Bills receivable A/c, ……Dr, drawn, To Raju’s (Debtor) A/c, (Being acceptance received for 3 months), , Kachra seth (Creditor) A/c ……Dr, To Bills payable A/c, (Being acceptance given for 3 months), , Continuing the table with further cases…….., , Retained the Bill till Due & Met on Due date, (Amount paid on Due date), , [ NOTE :- The entries in orange box are of “dishonour of bill” and for the sake of our convenience,, “A” is Creditor /Drawer & “B” is Debtor /Drawee. ], , (1) Honoured by drawee: <<<(drawer is the holder of the bill) >>>, Date, Due, date, , In the books of Seller (drawer), Bank / Cash A/c, ……Dr, To Bill receivable A/c, (Being Bill honoured on due date), or, (Being amount received against B.R.), , In the books of Purchaser, (drawee), Bills payable A/c, ……Dr, To Cash/A/c, (Being Amount paid against B.P.), , If, the Bill DISHONOURED on Due date, Due, date, , B’s A/c ……Dr, (sum total), To Bill receivable A/c, (bill amt), To Bank / Cash A/c (noting charges), , Bills payable A/c, ……Dr, Noting charges A/c, ……Dr, To A’s A/c, , (Being the bill dishonoured and noting charges, paid), , (Being the bill dishonoured and, noting charges payable), , Accountancy by DHRUV GARG (9818552878) / AKASH ACADEMY (9910913871), , 3
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(2) Discounted the bill with Bank :, Date, , In the books of Seller (drawer), , In the books of Purchaser, (drawee), , Date on, Bank A/c, ………Dr (net receipt), which Bill, Discounting charges A/c ………Dr (interest), got, To Bill receivable A/c (gross value), discounted (Being Bill got discounted with bank), Due date, , No Entry, , Bills payable A/c, ……Dr, To Cash/A/c, , No Entry, , (Being Amount paid against B.P.), , If, the Bill DISHONOURED on Due date, Due date, , B’s A/c, ……Dr, To Bank / Cash A/c, , Bills payable A/c, ……Dr, noting charges), Noting charges A/c, ……Dr, (Being the bill dishonoured and noting charges paid), To A’s A/c, (bill amt +…………, , (Being the bill dishonoured and, noting charges payable), , (3) Endorsed to creditors :, Date, , In the books of Seller, , In the books of Purchaser, , /Drawer /Endorser, , Endorsee/Creditor, , Date on, Creditor’s/Endorsee A/c …Dr, which Bill, To Bill receivable A/c, Endorsed (Being bill endorsed in favour of, , No Entry, , creditor), , Due date, , No Entry, , In the books of, , Bills payable A/c, ……Dr, To Cash/A/c, , Bill receivable A/c, ……Dr, To Debtor’s/Endorser A/c, (Being bill received from, debtor), , Bank / Cash A/c, ……Dr, To Bill receivable A/c, , (Being Amount paid against B.P.) (Being amount received against, B.R.), , If, the Bill DISHONOURED on Due date, Due date, , B’s A/c ……Dr, (bill amt +… Bills payable A/c, ……Dr, To C’s/Endorsee A/c noting. Noting charges A/c ……Dr, charges), To A’s A/c, (Being the bill dishonoured and, noting charges paid), , B’s A/c ……Dr, To Bill receivable A/c, To Bank / Cash A/c, , (Being the bill dishonoured and (Being the bill dishonoured and, noting charges payable), noting charges paid), , Accountancy by DHRUV GARG (9818552878) / AKASH ACADEMY (9910913871), , 4
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(4) Bill sent to bank for collection :, Date, , In the books of Seller, , When bill Bill sent for Collection A/c ……Dr, sent for, To Bill receivable A/c, collection (Being the bill sent to bank for collection on due date), Due date, , In the books of Purchaser, , No Entry, , Bank A/c, ………Dr, To Bill sent for Collection A/c, , Bills payable A/c ……Dr, To Cash/A/c, , (Being the amount collected by bank for bill sent for, collection), , (Being Amount paid against B.P.), , If, the Bill DISHONOURED on Due date, Due, date, , B’s A/c ……Dr, (sum total), To Bill sent for Collection A/c, (bill amt), To Bank / Cash A/c, (noting charges), , Bills payable A/c, ……Dr, Noting charges A/c, ……Dr, To A’s A/c, , (Being the bill dishonoured and noting charges paid), , (Being the bill dishonoured and, noting charges payable), , Accountancy by DHRUV GARG (9818552878) / AKASH ACADEMY (9910913871), , 5
