Acceptance Of Bill Of Exchange

        Acceptance Of Bill Of Exchange

Every bill has to be accepted by the drawee. After the drawer has prepared the draft, it is sent to the drawee for the acceptance. Acceptance is an indication on the part of the drawee that he is willing to accept the liability under the bill. Acceptance is given by putting his signature across the face of the bill together with the place and the date. After acceptance , a  bill a bill of exchange is called Acceptance.

How Transactions Relating To Bills OF 
Exchange Are Recorded?

In a business concern, numerous bills of exchange are drawn and accepted. Generally under such condition special journal are used to record the bill of exchange, called Bill Receivable Journal and Bill Payable Journal. From these two journals the totals are posted to Bill Receivable Journal and Bill Payable Journal respectively.

Every Bill Has Two Different Aspects:

(a) To the drawer who has sold goods and want to 

be paid from them, it is a Bill Receivable, he hopes to receive money on the due date. It is a sort of asset for the drawer and as good as money.

(b) To the acceptor of the bill, who has bought  goods on credit and has agreed to honour the bill on the due date, it is a bill Payable. The acceptor must arrange in due course the funds available to honour the bill when it falls due.

Accounting Treatment For Bill Receivable and Bill Payable 

 

We can understand the accounting of bills of exchange with the help of an illustration. Let us suppose, Mr. Salman is a manufacturer of shoes and Mr. Imran is a retail trader of shoes. Mr Imran (the  buyer) wishes to buy shoes  (goods) from the manufacturer (seller) but he has no money. He is agreed to accept the bill of exchange for 90 days, if goods are sold to him on credit basics. So both the parties agreed. Mr. Salman supplies goods to Mr. Imran Rs. 10,000 for a 90 days credit and draws upon him a bill for the full value of goods for 90 days on 1st January ,2005.