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narasimha murty

Managing partner

32 Points Posted on 29 January 2010

It is a common practice of several small time suppliers to discount a document (generated at "goods receipt" point of a factory). The person who discounts them brings several such documents as a bunch and presents to the factory's Fin & Accounts for payment.

Can we consider such Goods Received Note as a Bill of Exchange and pass accounting entries accordingly?

Replies (4)

N.Sivaraj

Manager _ F&A

63 Points Posted on 29 January 2010

NOT CLEAR . PLS EXPLAIN.

shankar

M.com ICWAI Inter

30 Points Posted on 30 January 2010

not necessary.

they are not treated as bills of exchange

Reuben

CA->IPCC student

36 Points Posted on 30 January 2010

I dont think that you can consider it as Bills Of Exchange. Its a cash purchase receipt right?

narasimha murty

Managing partner

32 Points Posted on 31 January 2010

I detail my question here. In this case there are three parties- Seller (of material), Buyer (of material) and Outsider(who discounts GRNs). There is one document i.e GRN.

Activity 1. Seller brings material to the Buyer

Activity2 Delivers material and takes a copy of Goods Received Note (GRN) issued by the buyer.

Activity 3 Seller again sells the GRN to an outsider for a discount.

Activity 4 The outsider buys several such GRNs from many sellers.

Activity 5 The outsider comes to the buyer on an appointed date (say monthly once).

Activity 6 The buyer pays the bearer (Outsider) the GRN

Therefore in my opinion the buyer has to make entries of GRNs in his accounts but should not operate the seller's account. In such case, can we consider GRN as a legally valid IOU?