Accounting Treatment > Bills Sent to Bank for Collection

A. Bill sent to the bank for collection:

1. Books of Drawer:

Bill Sent for Collection A/c       ...Dr.

        To Bills Receivable A/c

(Being bill sent to the bank for collection)

2. Books of Drawee: No entry

(Drawee is not a party to the transaction)

B. Bill sent to bank for collection honoured on the due date and bank charges debited by bank:

1. Books of Drawer:

Bank A/c                      ...Dr.

Bank Charges A/c        ...Dr.

       To Bill Sent for Collection A/c

(Being bill honoured and bank charges debited)

2. Books of Drawee:

Bills Payable A/c              ...Dr.

       To Cash / Bank A/c

(Being our acceptance honoured)

C. Bill sent to bank for collection dishonoured on the due date:

1. Books of Drawer:

Drawee’s A/c                ...Dr.

       To Bill Sent for Collection A/c

(Being bill sent for collection dishonoured)

2. Books of Drawee:

Bills Payable A/c              ...Dr.

        To Drawer’s A/c

(Being our acceptance dishonoured)

D. Bill sent to bank for collection dishonoured on due date and Noting Charges paid:

1. Books of Drawer:

Drawee’s A/c                 ...Dr.

        To Bill Sent for Collection A/c

        To Bank A/c

(Being bill sent for collection dishonoured and noting charges paid)

2. Books of Drawee:

Bills Payable A/c               ...Dr.

Noting Charges A/c           ...Dr.

       To Drawer’s A/c

(Being our acceptance dishonoured and noting charges payable)

• The drawer can send the bill to the bank for collection instead of presenting it personally on the due date.
• The bank collects the amount from the drawee on the due date on behalf of the drawer.
• For this service, the bank charges a fee known as Bank Charges.
• A temporary account called “Bill Sent for Collection A/c” is opened by the drawer for this purpose.
• This account is closed when the bank collects the payment or if the bill is dishonoured.