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Accounting and Journal Entry for Bill of Exchange

Journal Entry for Bill of Exchange

Bill of exchange is an instrument in writing signed by the maker which contains an order without any conditions. It directs another person to pay a specific sum of money to the bearer of the instrument (or) to a particular person (or) to the order of a particular person. Journal entry for bill of exchange is posted differently in the books of both drawee and the drawer.

A valid bill of exchange acts as a bill receivable for the drawer (Issuer) and bill payable for the drawee (Acceptor).

Journal Entry in the Books of Drawer

Accounting in the books of drawer at different stages is shown as follows;

  • When the sale of goods on credit is recorded in books of the drawer.

When credit sales are recorded in the books of drawer

  • When a valid and accepted bill of exchange is received against the above credit sale.

Journal entry when bill is received from drawee

  • When payment is received, journal entry for bill of exchange is;

Journal entry when payment is received after maturity of a bill of exchange


Journal Entry in the Books of Drawee or Acceptor

Accounting in the books of drawee/acceptor at different stages is shown as follows;

  • When the purchase of goods on credit is recorded in books of the drawee/acceptor.

Journal entry in books of drawee - purchase of goods on credit

  • When a valid and accepted bill of exchange is provided for the above credit purchase.

Journal entry in books of drawee - when bill is given to drawer

  • When payment is made, the journal entry for bill of exchange is;

Journal entry when payment is made at maturity of a bill of exchange

 

>Read Bill of Exchange – with Template and Example