How to Deal with Bills of Exchange/ Accounting Treatment of Bills?
Students need to know about the accounting treatment of bills in order to create their journals flawlessly. Since there is more than one way to treat bills of exchange, it can get a bit confusing for students to remember how to treat the bills. And in accountancy, a small mistake will mess up the entire result and as such the answer which the student will obtain will not be the one they were looking for.
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Bills of Exchange and their accounting treatment:
Any active business organization undertakes several exchanges of bills on a regular basis. The bills which are either accepted or drawn are recorded in a separate journal. The bills which the drawn are recorded in the Bills Receivable Journal and the ones which are accepted are listed under Bills payable journal.
With respect to the bill, there can be four parties involved:
The drawer can treat a bill of exchange in the following ways:
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