Bills book
23/12/2020Known as a B/P book, bills payable book is a subsidiary or secondary book of accounting where all bills of exchange, which are payable by the business, are recorded. The total value of all the bills payable for an accounting period is transferred to the books of accounts.
Where the number of bills received or bills issued is large, it would lead to saving of time if, instead of journalizing each receipt of bill or issue of bill, we were to maintain suitable registers (or books) and record the transactions there. Two books would be required one for bills received and another for bills issued. The rulings for the two books are given below.
The book will be totaled monthly. In case of the Bills Receivable Book, the total of the amount column will be posted to the debit of the Bills Receivable Account. The accounts of the parties from whom the bills are received will be credited with the amounts appearing against their names.
In case of the Bills Payable Book, the total of the amount column will be posted to the credit of the Bills Payable Account and the accounts of the parties who drew the bills (or at whose request the bills were accepted) will be debited. It must be remembered that in the case of other transactions relating to bills, journal entries will have to be passed with the only exception of discounting.
When a bill is discounted, the entry will be made on the debit side of the Cash Book the amount received being entered in the bank column and the amount of the discount being entered in the discount column. In the case of endorsement in favour of a creditor or for dishonour, the entry concerned will be through the journal.
In a mid to large sized business where the number of bills exchanging hands is large in number, it is tough to journalize all bills drawn. All such bills are entered in an accounting ERP or a register depending on the business, furthermore, all these entries are transferred to the respective ledger accounts at a regular interval, often monthly.
A bill receivable for a “drawer” is a bill payable for a “drawee”. Bills payable account will usually have a credit balance, as it is supposed to be paid at maturity, it acts as a liability for the business. Generally, every bill has a 3-day grace period.
Sample Format of a B/P Book
The person, who draws the bill of exchange, is called a “drawer” and the customer, on whom it is drawn, is called a “drawee” or an “acceptor”.
S. No. | Date of Bill | Bill No. | Drawer | Payee | Terms | Date of Maturity | Amt. | Remarks |