Books of Drawer and Acceptor
by The drawer is the person who prepares, signs, and issues a bill of exchange. Generally, the seller or creditor acts as the drawer in a credit transaction. The drawer orders the buyer, known as the drawee, to pay a specified amount either on demand or on a future date. After preparing the bill, the drawer sends it to the drawee for acceptance. The drawer is entitled to receive the payment on maturity or may transfer the bill to another person through endorsement. Thus, the drawer initiates the bill of exchange and plays a key role in creating the instrument.
Journal Entries in the Books of Drawer:
The drawer is the person who draws the bill of exchange and receives acceptance from the drawee. The following journal entries are passed in the books of the drawer.
| Transaction | Journal Entry |
|---|---|
| Drawing and Acceptance of Bill | Bills Receivable A/c Dr. To Debtor’s A/c |
| Retention of Bill till Maturity | No Entry |
| Discounting of Bill with Bank | Bank A/c Dr. Discount A/c Dr. To Bills Receivable A/c |
| Endorsement of Bill to Creditor | Creditor’s A/c Dr. To Bills Receivable A/c |
| Collection of Bill on Maturity | Bank A/c Dr. To Bills Receivable A/c |
| Dishonour of Bill | Debtor’s A/c Dr. To Bills Receivable A/c |
| Noting Charges Paid by Holder | Debtor’s A/c Dr. To Bank/Cash A/c |
| Dishonour with Noting Charges | Debtor’s A/c Dr. To Bills Receivable A/c To Bank/Cash A/c (Noting Charges) |
Summary of Entries
| Transaction | Effect |
|---|---|
| Drawing and Acceptance | Converts Debtor into Bills Receivable |
| Discounting | Bills Receivable converted into Cash |
| Endorsement | Bills Receivable transferred to Creditor |
| Collection | Amount received on maturity |
| Dishonour | Debtor’s liability revived |
| Noting Charges | Recoverable from Debtor |
Acceptor
The acceptor is the person who accepts a bill of exchange and agrees to pay the amount mentioned in it on the due date. Usually, the drawee becomes the acceptor after signing the bill. By accepting the bill, the acceptor undertakes a legal obligation to make payment at maturity. The acceptance is generally indicated by the acceptor’s signature on the face of the bill. Once accepted, the bill becomes a legally enforceable instrument. The acceptor is primarily liable for payment and must honour the bill when it becomes due to maintain business credibility and trust.
Journal Entries in the Books of Acceptor:
The acceptor is the person who accepts the bill of exchange and becomes liable to pay the amount on the due date. The following journal entries are passed in the books of the acceptor.
| Transaction | Journal Entry |
|---|---|
| Acceptance of Bill | Creditor’s A/c Dr. To Bills Payable A/c |
| Payment of Bill on Maturity | Bills Payable A/c Dr. To Bank/Cash A/c |
| Cancellation of Old Bill on Renewal | Bills Payable A/c Dr. To Creditor’s A/c |
| Interest Due on Renewal | Interest A/c Dr. To Creditor’s A/c |
| Acceptance of New Bill | Creditor’s A/c Dr. To Bills Payable A/c |
| Dishonour of Bill | Bills Payable A/c Dr. To Creditor’s A/c |
Summary of Entries
| Transaction | Effect |
|---|---|
| Acceptance | Creates Bills Payable liability |
| Payment | Settles Bills Payable |
| Renewal | Cancels old bill and creates new liability |
| Interest on Renewal | Records cost of extension of time |
| Dishonour |
Restores liability to creditor’s account |