ACCOUNTS [PRESENTATION OF DATA]

'Acceptance' means an acceptance completed by delivery or notification

'Bank' means a body of persons, whether incorporated or not, that carries on the business of banking .
'Bearer' means the person in possession of a bill which is payable to bearer.
'Bill' means a bill of exchange .
'Cheque' means a bill drawn on a bank payable on demand.
'Collecting Bank' means a bank collecting payment of a cheque or other document .
'Holder' means the payee of indorsee of a bill who is in possession of it, or the bearer thereof;
'Indorsement' means an indorsement completed by delivery .
'Issue' means the first delivery of a bill, complete in form, to a person who takes it as a holder;

2) TREATMENTS
DRAWER:
Bills receivable :
The bills of exchange that a company will receive payment for in the future , and the part of the
company's accounts that shows these bills . Bills receivable form part of a company's assets .
Current assets :
The term current assets represents all the assets of a company that are expected to be
conveniently sold, consumed, utilized or exhausted through the standard business operations
which can lead to their conversion to a cash value over the next one year.

Alternatives:-

1] Retaining the bill till due date:

In this case the drawer/holder of a bill may retain till its due date . On due date , he presents it
to drawee for payment. Then it may honour or dishonor . Hence retention of a bill is not a
transaction so no separate journal entry is passed for such dealing . When drawer is not in
urgent need of money and can wait till due date receives the amount of bill, he keeps the bill
with himself till its due date and on due date presents it to drawee to receive the amount . In
this case the drawer is the holder of bill.
2] Endorsement of a Bill of exchange:
A Bill of exchange is negotiable instrument ie. transferable from one person to another person in
due course. The holder of a bill may transfer in favour of his creditors to settle his own dues. On
transfer he must sign on the back side of the bill. This is known as the "endorsement of a bill of
exchange". The holder who transfers the title of the bill is called endorser. He may be drawer or
holder of a bill. The person in whose favour it is transferred is called endorsee. This endorsement
may continue till due date
3] Discounting of a bill of exchange:

The holder of a bill when is in need of money before the due date of the bill he may sell it to the
bank .The bank will give cash for it in consideration of a small charge. This is called discounting of the
bill . The amount deducted by bank from the face value of the bill is called "discount”.It is calculate for
unexpired period at a prevailing rate. This is way to convert bill into cash.
On due date bank present the bill for payment, if drawee honoured the bill bank gets the full value of
the bill but if it is dishonoured bank returns it to the holder and collect the full value form him . It is
contingent liability of the holder, till the bill is honoured .

4] Deposit of a Bills of Exchange for Collection;-

When a drawer receives a bill, he may keep it till the due date in order to collect the full amount.
But in order to ensure safety, he may send it to his bank with the instruction that the bill should
be retained till maturity and should be realised on due date on his behalf. This does not mean
discounting of bill. On due date bank presents the bill to drawee for payment, if honoured bank
collects the cash and credit to the bank account of depositor, but if dishonoured returns to him.
For such services bank charges are debited by the bank.
On deposit of a bill drawer opens in his book Bill Sent for Collection Account. It is a personal
type of account.
DRAWEE :
BILLS PAYABLE :-
A bill of exchange is regarded as BILL PAYABLE by one who has to pay it on the due date .
The acceptor of the bill becomes liable to pay on its maturity, it is Bill Payable
It means the same bill is a BILL RECEIVABLE to one party and a BILL PAYABLE to the
other
CURRENT LIABILITY :-
Current liabilities are a company's debts or obligations that are due within one year or within a normal
operating cycle. Furthermore, current liabilities are settled by the use of a current asset, such as cash,
or by creating a new current liability. Current liabilities appear on a company's balance sheet and
include short-term debt, accounts payable, accrued liabilities, and other similar debts.

ALTERNATIVES :-
1] BILL TO BE HONOURED
When an acceptor makes the payment of a bill on due date , that bill is said to be honoured .
For this purpose drawer/holder of bill must present the bill to the drawee on the due date for
payment .

2] DISHONOUR OF BILL
 When on due date the acceptor fails or refuses to pay the amount of bill, it is termed as dishonor
of a bill . Non-acceptance of a bill also considered as dishonour.
If on due date the acceptor fails or refuses to pay the amount of a bill it is said to be
dishonoured and it will not remain in force . Hence entry regarding the bill would be reversed by
both drawer and drawee to cancle the effect of it.

3] RETIREMENT OF A BILL OF EXCHANGE:

Retiring a bill means making payment before the date of maturity. When the acceptor of a bill is
prepared to make the payment of the bill before the due date, he may ask the holder to accept the
payment, provided he receives some rebate or discount for the unexpired period. Such a rebate or
expense to the party receiving the payment and gain to the party making the payment.

4] Renewal of a Bill of Exchange:

Sometimes, acceptor of a bill finds himself unable to meet his acceptance on the due date . So
he may approach the drawer of the bill on or before the maturity date arrives, and request him
to cancel the old bill and draws a new bill with extended period. It may be conditional as
mutually agreed by them. The drawer may charge interest for the extended period. Thus the
cancellation of the old bill on maturity in return for a new bill (which may includes interest) for
an extended period is known as, "renewal of a bill of exchange"
The new bill is drawn with interest for the extended credit period.
a) The acceptor pays interest in cash and a new bill is accepted equal to the amount of old bill
OR
b) The acceptor pays part of the amount of the bill plus interest in cash and accepts new bill for
the balance.
OR
c) The acceptor pays part of the amount of the bill in cash and accepts nw bill for the balance
plus intrest.

Bill maybe renewed even after dishonour on maturity and payments of noting charges . In such
case above condition may include amount of noting charges.