bills for collection a/c doubt.

Hello Friend,

Let me give you an example. Suppose Company A has given Bill Of Exchange to Company B for Rs.20000. And take another case where Company C has given Bill of exchange to Comany A for Rs.50000. In this case suppose Company A had account with Indian Bank. Now A will present the bill to bank for collection of Rs.50000/-

And the Company B would have presented the bill of Rs.20000 to his bank for collection from Company A which again comes to Indian Bank.

Now in the books of  Indian Bank, there is a bill for collection(Asset) Rs.50000 and there is a bill for collection(Liability) of Rs. 20000/-. Thus the accounts are evolved and the settlement is dine ultimately for the bill amount.

If you are still unclear you may mail me at srini.ca @ gmail.com

Rgards

Bills for collection means bills are sendig to Bank for collection/clearing

Bills purchased means we purchased bills of other co. at discount

Bills discounted means we endorsed our bill to bank or other co. at discount.

it is just a memorandum account.

Imagine yourself as the bank

You have to get money from some person hence it is an asset.

Same way you have to pay money to another hence it is a liability.