|As explained in Part 1,
1. The bill of exchange after it is accepted is known as bill receivable to the drawer and bill payable to the acceptor [ When a drawee accepts the bill and signs he/she is known as the acceptor. The acceptor is primarily liable on a bill to the drawer so long as the drawer retains the bill. When the bill is negotiated and transferred to a payee, the drawer than become liable on the bill as well as the acceptor.]
Below shows the accounting entries of Bills Receivable and an illustration on how to pick up the Bills Receivable in the Ledger Accounts.
|Accounting Entries For Bills Receivable
|Illustration: On 1/1/200X, A sold goods to B for $50,000 and drew a bill on B at four months in settlement. B accepted the bill. On 30/1/0X, A discounted the bill with the bank at 6% per annum. At maturity, B failed to meet his bill and the holder had recourse against A. On 1/5/0X, A drew and B accepted a new bill at three months for the amount of the original bill, plus interest at 12% per annum.
Question: Show the ledger accounts in A’s books.
Solution: In A’s Books:
Bills Receivable Account
Discount Charges Account
Interest Receivable Account
|See next article Part C on Accounting for Bills Payable|
July 25th, 2007 Comments off
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