In the world of finances, everything is attached to payment for a commercial transaction. Transactions are a big part of any company as the revenue generation as a financial image can only be decided by how much the company is earning.
Nowadays, companies like to portray their positive image in the market to attract investors and customer as well. One term related to payment in accounts is a renewal of the bill. As stated earlier, bill payment is an essential part of any institution; accountants like to capture every record possible for a future record and evidential purposes.
In any firm, anything related to payment is well recorded and so is a renewal of the bill. Here renewal of the bill homework answers will explain the steps of renewal of the bill in the firms.
Understanding the concepts of bill renewal:
In simple terms, cancellation of old bill and generation of the new bill is referred as the renewal of the bill. There are various scenarios related to it. There are some cases given below under which the bill has to be renewed.
There are times when drawee is not able to pay the bill amount as per the due date. He may request the drawer to provide some extra time for the bill payment. If the drawer agrees to it, the bill is generated again by cancelling the old bill with a new due date.
This procedure is a renewal of bill. When drawer decides to renew the bill, the drawee is liable to pay the interest to payee from the old due date to the new due date.
Differences with dishonouring of bill
Although it sounds similar to dishonouring the bill, it is not the same.
Dishonouring the bill, the term used when the drawee fails to pay the bill amount either by refusing it or failing the due dates.
On the contrary, if the drawee reaches out to payee asking for a renewal of the bill, it is known as a renewal of the bill.
Renewal of the bill homework answers explains the topic in details so that one can understand the differences clearly and understand the terms easily for the financial accounting in better ways. Because, it is likely to mix up the term which creates confusion. With the help of these homework answers, one can comprehend the accounting terms in better ways.
Examples of bill renewal:
Let’s understand the renewal of bill with the real life example by renewal of the bill homework answers.
Following are the steps for the renewal of the bill in business:
Step 1: Making the deal
Suppose, there is person A who is a manager at the firm, and there is a client company which is represented by person B. Client company wants to buy goods which are manufactured by the company of A.Person A makes a deal with client company of selling $40,000 worth of goods.
Step 2: Bill generation
After the deal is made, person A start shipping the order in a direct manner and generates the bill. The deal is made on 1st July 2016 and bill generation done on the same date.
Step 3: Due date
The bill has the due date of 1st September 2016. So, the window can allow the client company to pay the whole amount on time, and both the parties can have good relations which can help both in future.
Step 4: Client approach
Before the due date, person B of the customer company reaches out to the firm member A. person B proposes to extend the due date of the payment due to some financial issues.
Financial issues can be any problem, like technology problem for the transaction, payment receivable not received yet, the key person is out of the position, etc.
Step 5: Interest on renewal
Person A of the manufacturing company understands the problem and asks for 10% interest charges on the payment for new due date which will be after 3 months. The new due date can be any date. It depends upon convenience of both the parties says renewal of the bill homework answers.
Step 6: Confirmation of renewal
Person B finds the deal feasible for the new due date and approves the proposal with interest rates. Now person B has to pay the actual amount plus the interest rates on it too.
Step 7: Cancelling old bill
Person A starts the procedure of withdrawing the old bill so that new bill with another due date can be generated for representing to the client company.
Step 8: Renewal of the bill
The manufacturing company starts preparing the new bill with the new amount, interest charges and due date for the client company. This procedure is called, renewal of the bill. Before the new due date, the bill can be honoured by client company so that both the companies have the win-win situation with the help of renewal of the bill homework answers.
It is important to honour the bill in the world of business for better relationships with companies and customers around the globe. Because, dishonouring the bill leads to debt. As the debt increases, interest becomes higher which makes the real payment more difficult to pay for the company.
Renewal of Bill is there to help companies when needed, but dishonouring of it leads to debt. Increased debt sometime transforms in bankruptcy and bad debt.
So, it is necessary to use renewal of Bill procedure when in need, but it advisable to make the use of it with care so that the financial image can sustain the changes in market.