Question

What is meant by dishonour of a bill of exchange?

Answer 1

Dishonour of a bill happens when the acceptor of the bill fails to make the payment on the date of maturity of the bill.

Hence, liability of the acceptor is restored.

Entries made for recording dishonour of the bill of exchange are reverse of the entries of recording drawing of the bill.

In the books of drawer

Acceptor A/c  Dr,
  To Bills Receivable A/c
(Bill dishonoured)

In the books of acceptor/drawee

Bills Payable A/c  Dr.
  To Drawer A/c
(Bill dishonoured)