Accounting Treatment> Endorsement of Bill of Exchanges

A. Drawer endorses the bill to Endorsee:

1. In the Books of Drawer/Endorser:

Endorsee’s A/c           ...Dr.

      To Bills Receivable A/c

(Being Drawee’s acceptance endorsed to our creditor)

2. In the Books of Drawee: No Entry

(Drawee is not a party to the endorsement transaction)

3. In the Books of Endorsee:

Bills Receivable A/c         ...Dr.

          To Endorser’s A/c

(Being Bills Receivable received from our debtor)

B. Endorsed bill honoured on the due date:

1. In the Books of Drawer / Endorser: No entry

(Drawer is not a party to the transaction)

2. In the Books of Drawee:

Bills Payable A/c        Dr.

      To Cash / Bank A/c

(Being our acceptance honoured)

3. In the Books of Endorsee:

Cash / Bank A/c          ...Dr.

        To Bills Receivable A/c

(Being Bills Receivable received honoured)

C. Endorsed bill dishonoured on the due date:

1. In the Books of Drawer / Endorser:

Drawee’s A/c             ...Dr.

     To Endorsee’s A/c

(Being an endorsed bill dishonoured on the due date)

2. In the Books of Drawee:

Bills Payable A/c         ...Dr.

        To Drawer’s A/c

(Being our acceptance dishonoured)

3. In the Books of Endorsee:

Endorser’s A/c           ...Dr.

     To Bills Receivable A/c

(Being Bills Receivable dishonoured)

D. Endorsed bill dishonoured and noting charges paid by Endorsee:

1. In the Books of Drawer / Endorser:

Drawee’s A/c             ...Dr.

         To Endorsee’s A/c

(Being endorsed bill dishonoured and noting charges paid by Endorsee)

(Amount = Bill amount + Noting Charges)

2. In the 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)

3. In the Books of Endorsee:

Endorser’s A/c           ...Dr.

       To Bills Receivable A/c

       To Cash A/c

(Being Bills Receivable dishonoured and noting charges paid)

• Endorsement means transferring the title of a bill by signing it on the back and handing it over to another person.
• The person who transfers the bill is called the Endorser, and the one who receives it is the Endorsee.
• Endorsement is usually done to settle a debt the drawer or holder owes to others.
• A bill of exchange is a negotiable instrument and can be endorsed multiple times before maturity.
• On the due date, the endorsee presents the bill to the drawee and receives the payment.