Accounts
This query is : Resolved
02 December 2015
how do calculate the maturity date in bills of exchange when it is given in days???
02 December 2015
When the bill is met on maturity.
Bills payable account [Dr.]
To Cash account [Cr.]
Bills payable account [Dr.]
To Cash account [Cr.]
02 December 2015
Make journal entries in the books of creditor and debtor at the time of drawing, acceptance, and payment of a bill of exchange.
When a bill is written it is known as "drawing" a bill. The person who draws it is the creditor and the person to whom it is addressed is the debtor. The creditor and the debtor are also known as the drawer and the drawee respectively. When the drawee signifies his assent to the order in writing he becomes the acceptor of the bill if exchange. It is said to be discharged when the acceptor makes the actual payment on the bill on the maturity date. Journal entries in the books of drawer and drawee are as under:
Creditor's Books
(a) When a bill of exchange is drawn and accepted.
Bill receivable account [Dr]
To Acceptor's personal account [Cr.]
(b) On the due date the acceptance will be presented to the acceptor for payment. If the payment is received directly:
Cash account [Dr.]
To Bills receivable account [Cr.]
Debtor's Books:
(a) When the bill is accepted by the drawee.
Personal account of the drawer [Dr.]
To Bills payable account [Cr.]
(b) When the bill is met on maturity.
Bills payable account [Dr.]
To Cash account [Cr.]
Example:
X sold goods to Y for $1,000 on 1st January 1991 and draws on Y a bill of exchange at three months for this amount. Y accepts the bill and returns it to X. The bill is dully met at maturity. Show the journal entries to record the transactions in both the parties books
Journal Entries in the Books of X
1991 $ $
Jan. 1 Y 1,000
To Sales account 1,000
(Goods sold on credit)
Jan. 1 Bills receivable account 1,000
To Y 1,000
(Acceptance received)
Apr. 4 Cash account
1,000
To Bills receivable account
1,000
(Amount of the bill received)
Journal Entries in the Books of Y
1991 $ $
Jan. 1 Purchases account 1,000
To X 1,000
(Goods purchased on credit)
Jan. 1 X 1,000
To Bills payable account 1,000
(Acceptance given)
Apr. 4 Bills payable account
1,000
To Cash account
1,000
(Acceptance paid)
When a bill is written it is known as "drawing" a bill. The person who draws it is the creditor and the person to whom it is addressed is the debtor. The creditor and the debtor are also known as the drawer and the drawee respectively. When the drawee signifies his assent to the order in writing he becomes the acceptor of the bill if exchange. It is said to be discharged when the acceptor makes the actual payment on the bill on the maturity date. Journal entries in the books of drawer and drawee are as under:
Creditor's Books
(a) When a bill of exchange is drawn and accepted.
Bill receivable account [Dr]
To Acceptor's personal account [Cr.]
(b) On the due date the acceptance will be presented to the acceptor for payment. If the payment is received directly:
Cash account [Dr.]
To Bills receivable account [Cr.]
Debtor's Books:
(a) When the bill is accepted by the drawee.
Personal account of the drawer [Dr.]
To Bills payable account [Cr.]
(b) When the bill is met on maturity.
Bills payable account [Dr.]
To Cash account [Cr.]
Example:
X sold goods to Y for $1,000 on 1st January 1991 and draws on Y a bill of exchange at three months for this amount. Y accepts the bill and returns it to X. The bill is dully met at maturity. Show the journal entries to record the transactions in both the parties books
Journal Entries in the Books of X
1991 $ $
Jan. 1 Y 1,000
To Sales account 1,000
(Goods sold on credit)
Jan. 1 Bills receivable account 1,000
To Y 1,000
(Acceptance received)
Apr. 4 Cash account
1,000
To Bills receivable account
1,000
(Amount of the bill received)
Journal Entries in the Books of Y
1991 $ $
Jan. 1 Purchases account 1,000
To X 1,000
(Goods purchased on credit)
Jan. 1 X 1,000
To Bills payable account 1,000
(Acceptance given)
Apr. 4 Bills payable account
1,000
To Cash account
1,000
(Acceptance paid)
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