Accounting Treatment> Retaining the Bill till the Due Date

A. Creditor sells goods on credit:

1. Books of Drawer / Creditor:

Debtor’s A/c               ...Dr.

        To Sales A/c

(Being goods sold on credit)

2. Books of Drawee / Debtor:

Purchases A/c               ...Dr.

       To Creditor’s A/c

(Being goods purchased on credit)

B. Drawer draws a bill, and acceptance received:

1. Books of Drawer / Creditor:

Bills Receivable A/c          ...Dr.

        To Drawee’s A/c

(Being bill drawn and acceptance received)

2. Books of Drawee / Debtor:

Drawer’s A/c                ...Dr.

       To Bills Payable A/c

(Being acceptance given)

C. Retained bill honoured on due date:

1. Books of Drawer / Creditor:

Cash / Bank A/c             ...Dr.

       To Bills Receivable A/c

(Being retained bill duly honoured on the due date)

2. Books of Drawee / Debtor:

Bills Payable A/c             ...Dr.

      To Cash / Bank A/c

(Being our acceptance honoured)

D. Retained bill dishonoured on the due date:

1. Books of Drawer / Creditor:

Drawee’s A/c                  ...Dr.

       To Bills Receivable A/c

(Being retained bill dishonoured on the due date)

2. Books of Drawee / Debtor:

Bills Payable A/c             ...Dr.

        To Drawee’s A/c

(Being our acceptance dishonoured on the due date)

E. Retained bill dishonoured and noting charges paid by Drawer:

1. Books of Drawer / Creditor:

Drawee’s A/c                  ...Dr.

     To Bills Receivable A/c

     To Cash A/c

(Being retained bill dishonoured on the due date and Noting Charges paid)

2. Books of Drawee / Debtor:

Bills Payable A/c             ...Dr.

Noting Charges A/c         ...Dr.

        To Drawee’s A/c

(Being our acceptance dishonoured and Noting Charges payable)

• The drawer can hold the bill until the due date instead of endorsing or discounting it.
• On the due date, the drawer (or holder) presents the bill to the drawee for payment.
• The drawee may honour (pay) or dishonour (refuse) the bill on the due date.
• If the bill is honoured, the drawer receives the payment directly from the drawee.
• This method involves no bank or third-party involvement until maturity.