BILL SENT TO THE BANK

           BILL SENT TO THE BANK 

(Fourth option)

If a businessman has numerous bills that he got from various debtors he may send those bills to his banker for collection purpose. It should be remembered that, this is not discounting of bill, the bills are sent for safety and collection purpose. The bank keeps the bill in its custody till the due date and on the due dates, the bank will present the bill to the various acceptors. After collecting the amount, the bank transfers the amount to the account of its customer (by giving credit to his account ). The bank charges some nominal fee from the customer for services he rendered. This is an expense to the customer and revenue for the bank.

The drawer opens a temporary account in his books, when the bill is sent to the bank for collection. The name of account is "Bank for collection account ". The bill is transferred to this account and the following entry is passed in journal of Drawer.

Bank for collection account............. Dr. XX.

       Bill Receivable account.................Cr. XX.