Accounts- 12th std- bills of exchange.
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
26 December 2014
what is the nature of "bill for collection a/c"? is it a real a/c?
RAMESH KUMAR VERMA
(Expert)
26 December 2014
A bill of exchange is a writing by a party (maker or drawer) ordering another (payor) to pay a certain amount to a third party (payee).
the drawer writes the bill in the form of draft in the initial stage. The draft becomes the bill of exchange after its acceptance. It can, thus, be said that the bill has come into existence at drawee’s place. (It was a draft, so far before the acceptance). Bill of exchange is a legal document, so entries will be made on its every movement. The Bill will at first go to the drawer for retention. The drawer will receive the bill, so he will debit Bills Receivable account, because B/R Account is real account for which the rule goes “Debit what comes in”. According to modern approach, Bills Receivable account is an asset which is increasing, so it will be debited. The drawer will credit drawee’s account because he is giver (the rule goes credit the giver). According to modern approach, debtors account as an asset will be credited, because it is decreasing. Debtors will decrease, when they accept the bill. (Decrease in the assets are credited).
the drawer writes the bill in the form of draft in the initial stage. The draft becomes the bill of exchange after its acceptance. It can, thus, be said that the bill has come into existence at drawee’s place. (It was a draft, so far before the acceptance). Bill of exchange is a legal document, so entries will be made on its every movement. The Bill will at first go to the drawer for retention. The drawer will receive the bill, so he will debit Bills Receivable account, because B/R Account is real account for which the rule goes “Debit what comes in”. According to modern approach, Bills Receivable account is an asset which is increasing, so it will be debited. The drawer will credit drawee’s account because he is giver (the rule goes credit the giver). According to modern approach, debtors account as an asset will be credited, because it is decreasing. Debtors will decrease, when they accept the bill. (Decrease in the assets are credited).
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