Question

On 1st March 2018 X drew a bill on Y for 2000 for 3 months which was accepted by Y and returned to X X got the bill discounted from his banker at a discount of 20 before the date of maturity Y requested X that he would not be able to meet the bill he is ready to give 1000 immediately and requested to drew a new bill at 2 months for the balancing including interest at 6% X accepted the proposal The new bill was met on the due date Pass journal entries in the books of X​

Answer 1

Explanation:

Journal Entry for Bills of Exchange

The drawer is the person who draws or makes the bill and sends it to the drawee or the payer for the acceptance. Once accepted, the bill becomes Bills Receivable for the drawer and Bills Payable for the drawee or payee.

The drawer may endorse the bill to another person who becomes the holder of the bill. On the due date, the holder presents the bill to the drawee for payment.

The payee is the person who eventually pays for the bill. Drawee will be the payee as well most of the time but sometimes a third party will pay the bill on behalf of the drawee then the third party will become the payee

Browse more Topics under Bills Of Exchange And Promissory Notes

Introduction to Negotiable Instruments

Promissory Notes

Retirement of Bills of Exchange

Treatment of Bills of Exchange

The drawer can treat the bill in the following ways:

Retain it till maturity

Discount it with the bank

Endorse it in favor of another person

On the due date, there can be two situations:

The bill is honored.

The bill is dishonored.

Journal Entry for Bills of Exchange

Journal Entry for Bills of Exchange