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

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

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 the books of the drawee/acceptor.

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

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

Short Quiz for Self-Evaluation

>Read Bill of Exchange – with Template and Example