J. K. SHAH CLASSES S.Y.J.C.
- BOOK KEEPING & ACCOUNTANCY
CHAPTER 7 BILL OF EXCHANGE
Weightage: 16 Marks
Practical question 10 Marks Specimen of a bill 5 Marks Objectives 1 Mark
Definition of bill of exchange:
“An instrument in writing containing an unconditional order, signed by the maker,
directing a certain person, to pay on demand or at a future date a certain sum of
money only, to the order of a certain person, or to the bearer of the instrument.”
Parties to the bill of exchange:
1. Drawer: - Drawer is the person or a party who drawes a Bill of Exchange. He is
also known as maker of bill of exchange.
2. Drawee: - Drawee is a person or a party to whom the bill of exchange is drawn.
Drawee is the person who accepts the bill.
3. Payee: The Payee is a person or a party to whom the bill is made payable.
Specimen of a bill:
BILL OF EXCHANGE
Drawer’s Name
STAMP
Drawer’s address
Amount in
figures Date of bill drawn
after date, pay Mr / Ms
(Period of bill) Name and address of payee)
Or his/her order, the sum of Rupees
(Amount in words)
Only for the value received.
Sd/-
(Drawer’s Name)
(Drawee’s Name) (Accepted)
(Drawee’s Address) (Drawee’s Name)
(Date of Bill Accepted)
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J. K. SHAH CLASSES S.Y.J.C.- BOOK KEEPING & ACCOUNTANCY
Proforma journal entries with respect to bills transactions in the books of drawer
and drawee:
SR TRANSACTION JOURNAL OF DRAWER JOURNAL OF DRAWEE
N0.
1 For credit sale of goods by Drawee,s A/c Dr. Purchases A/c Dr.
drawer to drawee To Sales To Drawer’s A/c
2 For receipt for bill duly Bills receivable A /c Dr Drawer’s A/c Dr
accepted by drawee. To Drawee’s A/c To Bills payable A/c
3 If bill is retained till maturity Cash / Bank A/c Dr Bills payable A/c Dr
by drawer and honoured by To Bills Receivable A/c To Cash/Bank A/c
drawee.
4 If bill is discounted by the Cash/Bank A/c Dr No accounting entry
drawer. Discount A/c Dr.
To Bills Receivable A/c
5. If discount bill is honoured No accounting entry Bills payable A/c Dr
by drawee. To Cash/Bank A/c
6 If bill is endorsed by drawer. Endorsee A/c Dr No accounting entry
To Bills Receivable A/c
7 If the endorsed bill is No accounting entry Bills payable A/c Dr
honoured by drawee. To Cash / Bank A/c
8 If bill is sent to the bank for Bills sent to bank for collection Dr No accounting entry
collection by drawer. A/c
To bills receivable A/c
9 If bill is sent to the bank for Bank A/c Dr Bills payable A/c Dr
collection is honoured by Bank charges A/c Dr. To Cash / Bank A/c
drawee and bank charges To Bills for collection A/c
are debited by the bank.
10 If bill is retired by drawee Cash/Bank A/c Dr Bills payable A/c Dr
Rebated A/c Dr To Cash/Bank A/c
To Bills Receivable A/c To discount A/c/ Rebate
11 If bill is dishonoured by
drawee
1. If bill is retained by the Drawee’s A/c Dr Bills payable A/c Dr
drawer and dishonoured. To bills receivable A/c To drawer’s A/c
2. If discounted bill is Drawee A/c Dr Bills payable A/c Dr
dishonoured. To bank a/c To drawer’s A/c
3. If endorsed bill is Drawee A/c Dr, Bills payable A/c Dr.
dishonoured. To endorsee’s A/c To drawer’s A/c
4. If bill sent to bank for Drawee’s A/c Dr Bills payable A/c Dr
collection is dishonoured To bills send for collection To drawer’s A/c
A/c
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