Bills receivable and account receivable is concerned with credit sale of goods and service revenue.
When goods sold on credit:
The seller becomes vendor, suppler or creditor.
The buyer becomes purchaser, customer or debtor.
When goods sold on credit without guarantee (without bill of exchange), debtor or customer is debited.
When goods sold on credit with guarantee (with bill of exchange), bills receivable or account receivable is debited.
Seller writes bill of exchange and sends for the acceptance to the buyer; then buyer accepts that bill.
After accepting the bill, such written document becomes bills receivable for seller and bills payable for buyer.
The buyer will pay the amount of bills payable after some days or months.
Generally, the maximum due date of a bill is 90 days; grace days are 3 days.
When firm receives many bills receivable, then firm records them in a separate bills receivable book.
When firm has to pay many bills payable, then firm records them in a separate bills payable book.
Bills receivable book contains receipt date, name of drawee, term, due date, LF, amount and remark.
Bills payable book contains acceptance date, name of drawer, term, due date, LF, amount and remark.
The format of the bills receivable book and bills payable book are given below:
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Accounting Equation |
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Basic Journal Entries in Nepali |
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Analysis of Financial Statement |
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There are three parties to a bills of exchange; drawer, drawee and payee.
Drawer is the person who sells goods and services on credit and draws a bill.
In simple words, creditor (seller) is the drawer of a bill.
Drawee is the person purchases goods and services on credit and accepts a bill.
The debtor (buyer) becomes drawee after signing the bill of exchange.
Payee is a person to whom the payment of bill is to be paid.
The payee is the third party or the drawer himself.
Bills receivable and bills payable books record bills accepted by customers and suppliers date-wise,
(In the book of drawer)
SN |
Receipt date |
Received from (Drawee) |
Term |
Due date |
LF |
Amount |
Remark |
1 |
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2 |
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3 |
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Note: it is general format; it may vary according to need.
(In the book of drawee)
SN |
Acceptance date |
Acceptance given (Drawer) |
Term |
Due date |
LF |
Amount |
Remark |
1 |
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|
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2 |
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3 |
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Note: it is general format; it may vary according to need.
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country
PROBLEM: 5A
The following extracted information given by DK Traders for the month of August 2019:
Bills receivable:
August 1, Bill acceptance received from AK Traders of Rs 20,000 for 2 months.
August 15, Bill acceptance received from GB Suppliers of Rs 40,000 for 3 months.
August 18, Discounted bill of AK Traders at Rs 19,600 from Nabil Bank.
August 19, Acceptance received from RK Impex of Rs 60,000 for 2 months.
Bills payable:
August 5, We accepted bill of BL Traders of Rs 80,000 for 3 months.
August 20, Our acceptance to MK Suppliers of Rs 30,000 for 2 months.
Required: (a) Bills receivable book; (b) Bills payable book
[Answer: (a) Total 100,000; due date = 4 Oct; 18 Nov; 22 Oct
Bills Receivable Book
in the book of DK Traders
SN |
Receipt date |
Received from |
Term |
Due date |
LF |
Amount |
Remark |
1 |
1 Aug |
AK Traders |
2m |
4 Oct |
|
20,000* |
discounted |
2 |
15 Aug |
GB Suppliers |
3m |
18 Nov |
|
40,000 |
|
3 |
19 Aug |
MK Suppliers |
2m |
22 Oct |
|
60,000 |
|
|
Total |
|
|
|
|
100,000* |
|
Keep in mind
Discounted bill is not adjusted in total bills receivable* |
|
1 August + 2 months = 1 October 1 October + 3 grace days = 4 October |
15 August + 3 months = 15 November 15 November + 3 grace days = 18 November |
Calculate other due date as above example. If you face any difficulty, comment on comment box |
Bills Payable Book
in the book of DK Traders
SN |
Acceptance date |
Acceptance given (Drawer) |
Term |
Due date |
LF |
Amount |
Remark |
1 |
5 Aug |
BL Traders |
3m |
8 Nov |
|
80,000 |
|
2 |
20 Aug |
MK Suppliers |
2m |
23 Oct |
|
30,000 |
|
|
Total |
|
|
|
|
110,000 |
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country
PROBLEM: 5B
On 1 Jan 2020, Deepak sold goods to Binita for $/₹/Rs 40,000 on credit and draw a bill for 3 months. Binita accepts the bill. On maturity bill met payment.
Required: (a) Journal entries in the book of drawer (Deepak) and Bills receivable book.
(b) Journal entries in the book of drawee (Binita) and Bills payable book.
[Answer: due date 4 April]
SOLUTION
Journal Entries
In the book of drawer (Deepak) |
|
In the book of drawee (Binita) |
||||||||
Goods sold |
|
Goods purchases |
||||||||
Date |
Particulars |
|
$/₹/Rs |
$/₹/Rs |
|
Date |
Particulars |
|
$/₹/Rs |
$/₹/Rs |
1 Jan |
Binita |
Dr |
40,000 |
|
|
1 Jan |
Purchase |
Dr |
40,000 |
|
|
To Sales |
|
|
40,000 |
|
|
To Deepak |
|
|
40,000 |
|
(Being: goods sold) |
|
|
|
|
(Being: goods purchased) |
|
|
.
Accepted bill received |
|
Acceptance of bill |
||||||||
Date |
Particulars |
|
$/₹/Rs |
$/₹/Rs |
|
Date |
Particulars |
|
$/₹/Rs |
$/₹/Rs |
1 Jan |
B/R |
Dr |
40,000 |
|
|
1 Jan |
Deepak |
Dr |
40,000 |
|
|
To Binita |
|
|
40,000 |
|
|
To B/P |
|
|
40,000 |
|
(Being: bill received) |
|
|
|
|
(Being: bill accepted) |
|
|
.
On maturity period |
|
On maturity period |
||||||||
Date |
Particulars |
|
$/₹/Rs |
$/₹/Rs |
|
Date |
Particulars |
|
$/₹/Rs |
$/₹/Rs |
4 Apr |
Bank |
Dr |
40,000 |
|
|
4 Apr |
B/P |
Dr |
40,000 |
|
|
To B/R |
|
|
40,000 |
|
|
To Bank |
|
|
40,000 |
|
(Being: amount received) |
|
|
|
|
(Being: amount paid) |
|
|
Maturity Period
Bill accepting |
1 Jan 2020 |
|
Bill accepting |
1 Jan 2020 |
Add: Period of bill |
3 months |
|
Add: Period of bill |
3 months |
Due date |
1 Apr 2020 |
|
Due date |
1 Apr 2020 |
Add: 3 days of grace |
3 days |
|
Add: 3 days of grace |
3 days |
Maturity period |
4 Apr 2020 |
|
Maturity period |
4 Apr 2020 |
Bills Receivable Book
(In the book of Deepak)
SN |
Receipt date |
Received from |
Term |
Due date |
LF |
Amount |
Remark |
1 |
1 Jan |
Binita |
3m |
4 Apr |
|
40,000 |
|
|
Total |
|
|
|
|
40,000 |
|
Bills Payable Book
(In the book of Binita)
SN |
Acceptance date |
Acceptance given (Drawer) |
Term |
Due date |
LF |
Amount |
Remark |
1 |
1 Jan |
Deepak |
3m |
4 Apr |
|
40,000 |
|
|
Total |
|
|
|
|
40,000 |
|
********
PROBLEMS AND ANSWERS |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country
PROBLEM: 5A
Sanjay Medical Depot has following extracted information in the year 2020:
Jul 1, Acceptance received from Nirmal Medicals for $/₹/Rs 500,000 payable after 3 months.
Jul 20, Acceptance given to Shailaja Pharma bill for Rs 300,000 payable after 3 months
Jul 31, Acceptance received from Faisal Medicos for Rs 100,000 payable after 60 days.
Aug 5, Pfyzer Biopharma bill for Rs 100,000 payable after 180 days accepted.
Aug 11, Arya Pharma acceptance for Rs 70,000 payable after 90 days received.
Aug 31, Discounted Bill of Nirmal Medicals from State Bank at rebates Rs 5,000.
Required: bills receivable book and bills payable book
[Answer: Total B/R = 170,000; Due date 4 Oct, 2 Oct, 12 Nov;
Total B/P = 400,000; Due date 23 Oct, 8 Feb]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country
PROBLEM: 5B
On 1 August 2019, Dinesh sold goods to Anita for $/₹/Rs 75,000 on credit and draw a bill for 2 months. Anita accepts the bill. On maturity bill met payment.
Required: (a) Journal entries in the book of drawer and bills receivable book;
(b) Journal entries in the book of drawee and bills payable book.
[Answer: due date 4 October]
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