Different Cases Of Accomodation Bill
- When One Bill Is Drawn For The Accomodation Of One Of The Parties
(a) The party who is in need of money draws a bill upon other party.
(b) The other party i.e. the drawee accepts the bill and returns to the drawer i.e. first party.
(c) The drawee discounts the bill with the bank.
(d) At the due date of the bill, the drawer remits the required amount of the bill to the drawee to enable him to meet the bill on maturity.
Accounting Treatment
In the Books of first party:
Bills Receivable A/c Dr xxx
To other party xxx
(Being acceptance of bill received)
Bank A/c Dr. xxx
Discount A/c Dr. xxx
To Bills Receivable A/c xxx
(Being the bill is discounted with the bank)
Other party Dr. xxx
To Bank A/c xxx
(Being Required Amount is remitted to other party)
In the Books of other party:
First Party Dr. xxx
To Bills Payable A/c xxx
(Being acceptance of bill given)
Bank A/c Dr. xxx
To First Party xxx
(Being required amount received)
Bills Payable A/c Dr. xxx
To Bank A/c xxx
(Being bill discharged)
- When One Bill Is Drawn For Mutual Accomodation (a) One of the party draws a bill upon other party.
(b) The other party i.e. the drawee accepts the bill and returns to the drawer i.e. first party.
(c) The drawee discounts the bill with the bank and remits the drawee agreed share from the proceeds that has been received from the bank.
(d) At the due date of the bill, the drawer remits the balance amount due from him to the drawee to enable him to meet the bill on maturity.
Accounting Treatment
In the Books of first party:
Bills Receivable A/c Dr. xxx
To other party xxx
(Being acceptance of bill received)
Bank A/c Dr. xxx
Discount A/c Dr. xxx
To Bills Receivable A/c xxx
(Being the bill is discounted with the bank)
Other party A/c Dr. xxx
To Cash A/c xxx
To Discount A/c xxx
(Being agreed amount of the proceeds sent to other party)
Other party Dr. xxx
To Cash A/c xxx
(Being Remaining Amount is remitted to other party)
In the Books of other party:
First Party Dr. xxx
To Bills Payable A/c xxx
(Being acceptance of bill given)
Bank A/c Dr. xxx
Discount A/c Dr xxx
To First Party xxx
(Being agreed amount received)
Cash A/c Dr. xxx
To First Party xxx
(Being remaining amount received)
Bills Payable A/c Dr. xxx
To Bank A/c xxx
(Being bill discharged)
- When One Bill Is Drawn By Each Other’s Accomodation
(a) One of the party draws a bill upon other party and other party draws a bill to first party.
(b) Both of the parties accepts the bill from each other. Then after accepting return the same to other party.
(c) Both parties discounts their bills with the bank.
(d) At the due date of the bill, both of the parties honour the bill.
Accounting Treatment
When both of the parties draws bill of same amount in favour of each other, then there will be similar entries in the books of both parties
Bills Receivable A/c Dr. xxx
To other party xxx
(Being acceptance of bill received)
Other Party A/c Dr. xxx
To Bills Payable A/c xxx
(Being acceptance of bill given to other party)
Bank A/c Dr. xxx
Discount A/c Dr. xxx
To Bills Receivable A/c xxx
(Being the bill is discounted with the bank)
Bills Payable A/c Dr. xxx
To Cash A/c xxx
(Being bill discharged)
Bills Receivable Book
Bills Receivable Book is a subsidiary book, which is used to record the details of the bills receivable in favour of the party who is maintaining the Bills Receivable Book.
Bills Payable Book
Bills Payable Book is one of the subsidiary book, which is used to record the details of the bills payable accepted by the person or party who is maintaining the Bills Payable Book
Performa Of Bill Of Exchange
Ashok Kumar Lucknow
Rs.10,000 April 01, 2006
Three months after date pay to me or my order, the sum of Rupees Ten Thousand
only, for value received.
Stamp
Accepted
(signed) (Signed)
Ramesh
1.4.2006 Mahanagar Lucknow
73-B, Hazratganj Lucknow To
Ramesh
73-B, Hazratganj Lucknow
|
Performa Of Promissory Note
Abhishek Kumar Lucknow
Rs. 30,000 01 April, 2006
Three months after date I promise to pay Sh. Harish Gupta or order
a sum of Rupees Thirty Thousand only for value received.
Stamp
To
Harish Gupta Abhishek Kumar
24, Leader Road 26-C Indira Nagar
Allahabad Lucknow
|
- Name any two types of commonly used negotiable instruments.
Ans: Two commonly used negotiable instruments are Bill of Exchange and Promissory Note.
- Write two points of distinction between bills of exchange and promissory note.
Ans: (a) In the Bills of exchange there are three parties namely Drawer, Drawee and Payee while in Promissory Note, there are only two parties namely Maker or Drawer and Drawee.
- State any four essential features of bill of exchange.
Ans:
(a) A bill of exchange must be in writing. i.e. it is a written document.
(b) It is an unconditional order to make the payment.
(c) The amount mentioned in the bill of exchange is payable either on demand or on the expiry of a fixed period of time.
(d) The order to make payment is unconditional.
- State the three parties involved in a bill of exchange.
(a) Drawer (b) Drawee (c) Payee - What is meant by maturity of a bill of exchange?
Ans: Maturity of a bill means when the bill becomes due.
- What is meant by dishonour of a bill of exchange?
Ans: A bill is said to have been dishonoured when the drawee fails to make the payment on the date of maturity.
- Name the parties to a promissory note
(a) Drawer or Maker
(b) Drawee
- What is meant by acceptance of a bill of exchange?
Ans: The Bill of exchange is initiated by the drawer, who has either sold goods or provided service to drawee. In other words it is drawn by the creditor upon his debtor, before the acceptance it is called a Draft. Acceptance means the drawee has sent its acceptance.
- What is Noting of a bill of exchange.
Ans: To establish beyond doubt that the bill was dishonoured, despite its due presentation, it may preferably to be got noted by Notary Public. Noting authenticates the fact of dishonour. For providing this service, a fees is charged by the Notary Public which is called Noting Charges.
- What is meant by renewal of a bill of exchange?
Ans: When bill is canceled on the reqsest of drwee. i.e. the person who has to pay the amount, then it is termed as cancellation of biil.
Some times when the drawee is short of fund he requests to the drawer to cancel the bill and draw a new bill for another period.
-
Give the performa of a Bills Receivable Book.
-
Give the performa of a Bills Payable Book.
-
What is retirement of a bill of exchange?
Ans: Retirement of a bill refers to the situation, when the drawee has paid the amount before the due date. Usually if the drawee has surplus of fund before the due date of the bill then he can request to the Drawer to accept the money, before the due date. In such case the drawee is given a rebate for the period. For instance if the drawee has paid amount before one month then he will be given rebate for one month.
-
What is meant by insolvency?
Ans: When a debtor is unable to meet the liabilities and his assets are not sufficient to meet the liabilities, then the court declares that person as insolvent. If the debtor becomes insolvent and only part payment is received, then the remaining amount is recorded in the Deficiency Account.
- Give the meaning of rebate.
Ans: When a debtor pays due amount of a bill of exchange, before the due date, then for the unexpired period (i.e. the period between the date of payment and the maturity period, he is given a rebate at an agreed rate of interest.
- Give the performa of a Bill of Exchange.
