Here are the accounting entries to be passed for bills of exchange in detail:
- Issue of bill:When a bill of exchange is issued, the drawer debits the Bills Receivable account and credits the Drawee’s Account.Journal Entry:
Bills Receivable A/c Dr. To Drawee's A/c - Acceptance of bill:When a bill of exchange is accepted, the drawee debits the Bills Payable account and credits the Drawer’s Account.Journal Entry:
Bills Payable A/c Dr. To Drawer's A/c - Discounting of bill:When a bill of exchange is discounted with a bank, the drawer debits the Bank Account and credits the Bills Receivable account and the Discount Account.Journal Entry:
Bank A/c Dr. To Bills Receivable A/c To Discount A/c - Payment of bill on maturity:When a bill of exchange is paid on maturity, the drawer debits the Cash Account and credits the Bills Receivable account.Journal Entry:
Cash A/c Dr. To Bills Receivable A/c - Dishonour of bill:When a bill of exchange is dishonoured, the drawer debits the Bills Receivable account and credits the Bad Debts Account.Journal Entry:
Bills Receivable A/c Dr. To Bad Debts A/c
In addition to these basic entries, there are other accounting entries that may be required depending on the specific circumstances. For example, if a bill of exchange is endorsed to a third party, the endorser will need to record an entry to debit the Bills Receivable account and credit the Endorsements Account.