## Dishonour of Bill – Meaning

Dishonour of bill , means that the drawee of a bill of exchange, is not able to make the payment for the bill on the date of maturity. In such a case, the holder of the bill can recover the amount from the drawer , or any other previous endorsers.

### Journal Entries for Dishonour of Bill

**In Drawer’s Books:**

(i) **Case 1: Bill is retained by drawer till maturity and dishonoured on due date** :

*Drawee’s A/c Dr (Since money is now receivable from Drawee, so Drawee Account is Debited)*

*To Bills Receivable A/c (Since Bills Receivable is no longer an asset, it is Credited)*

*(Being bill dishonoured)*

(ii) **Case 2: Bill discounted with bank and is dishonoured**

*Drawee’s A/c Dr (Since money is now receivable from Drawee, so Drawee Account is Debited)*

*To Bank A/c (Since money is now payable to the Bank, so Bank Account is Debited)*

*(Being bill dishonoured and amount paid to bank)*

(iii) **Case 3: Endorsed bill is dishonoured**

*Drawee’s A/c Dr (Since money is now receivable from Drawee, so Drawee Account is Debited)*

*To Endorsee’s A/c (Since money is now payable to the Endorsee, so Endorsee Account is Credited)*

*(Being endorsed bill dishonoured)*

(iv) **Case 4: Bill sent to bank for collection dishonoured**

*Drawee’s A/c Dr (Since money is now receivable from Drawee, so Drawee Account is Debited)*

*To Bills Sent for Collection A/c (Since at the time of sending to Bank, Bills Sent for Collection was debited , so it is Credited)*

*(Being bills sent for collection dishonoured)*

### Journal Entries for Dishonour of Bill

** In Drawee’s Books:**

*Bills Payable A/c Dr (Since BillsPayable is no longer a Liability, it is Debited)*

*Noting Charges A/c DR (Since Noting Charges are an expense , it is Debited)*

*To Drawer’s A/c (Since money is now payable Drawer, so Drawer Account is Credited)*

To Bank A/c *(Since Noting Charges are paid through Bank , it is Credited)*

*( Being bill dishonoured and credit granted to the creditor for the amount of bill)*

**JOURNAL ENTRY IN THE BOOKS OF DRAWER – DISHONOUR OF BILL WHEN DRAWER IS THE HOLDER OF THE BILL**

**Accounting for Bills of Exchange- Question 18:**

A Bill of Rs. 7000 was drawn by H and accepted by S ,and is payable after 6 months. The Bill was dishonoured on the due date. H paid Rs. 500 as noting charges. What would be the Journal entry for dishonour of Bill in the books of H ?

**Explanation:**

S A/c Dr. 7,500

To Bills Receivable A/c 7,000

To Cash A/c 500

**JOURNAL ENTRY IN THE BOOKS OF DRAWEE – DISHONOUR OF BILL WHEN DRAWER IS THE HOLDER OF THE BILL**

**Accounting for Bills of Exchange- Question 19:**

A Bill of Rs. 10000 was drawn by W and accepted by A ,and is payable after 3 months. The Bill was dishonoured on the due date. W paid Rs. 1000 as noting charges. What would be the Journal entry for dishonour of Bill in the books of A ?

**Explanation**

Bills Payable A/c Dr. 10,000

Noting Charges A/c Dr. 1,000

To W A/c 11,000

**JOURNAL ENTRY IN THE BOOKS OF DRAWER – DISHONOUR OF BILL WHEN BANK IS THE HOLDER OF THE BILL**

**Accounting for Bills of Exchange- Question 20:**

A Bill of Rs. 10000 was drawn by Bhanu and accepted by Ankush ,and is payable after 4 months. Bhanu discounted the Bill with his Bank at 9900 . On the due date, the Bill was dishonoured and Bank paid Rs. 300 as noting charges. What would be the Journal entry for dishonour of Bill in the books of Bhanu ?

**Explanation:**

Ankush A/c Dr. 10300 ( 10000 + 300 )

To Bank A/c 10300

Note: Ankush ‘s A/c is debited since the Bill was dishonoured on the due date, and Bhanu will recover the amount along with noting charges paid by Bank from Ankush .

**JOURNAL ENTRY IN THE BOOKS OF DRAWEE – DISHONOUR OF BILL WHEN BANK IS THE HOLDER OF THE BILL**

**Accounting for Bills of Exchange- Question 21:**

A Bill of Rs. 11300 was drawn by D and accepted by V ,and is payable after 4 months. D discounted the Bill with his Bank at 11000 . On the due date, the Bill was dishonoured and Bank paid Rs. 200 as noting charges. What would be the Journal entry for dishonour of Bill in the books of V ?

**Explanation:**

Bills Payable A/c Dr. 11300

Noting Charges A/c Dr. 200

To D A/c 11500

**JOURNAL ENTRY IN THE BOOKS OF DRAWER – DISHONOUR OF BILL WHEN ENDORSEE IS THE HOLDER OF THE BILL**

**Accounting for Bills of Exchange- Question 22:**

A Bill of Rs. 12000 was drawn by X and accepted by Y ,and is payable after 1 months. X endorsed the Bill to his creditor, Z . On the due date, the Bill was dishonoured and Z paid Rs. 200 as noting charges. What would be the Journal entry for dishonour of Bill in the books of X ?

**Explanation:**

Y A/c Dr. 12,200 ( 12000 + 200 )

To Z A/c 12,200

**JOURNAL ENTRY IN THE BOOKS OF ENDORSEE- DISHONOUR OF BILL WHEN ENDORSEE IS THE HOLDER OF THE BILL**

**Accounting for Bills of Exchange- Question 23:**

A Bill of Rs. 7100 was drawn by H and accepted by R ,and is payable after 4 months. H endorsed the bill to his creditor, D . On the due date, the Bill was dishonoured and D paid Rs. 900 as noting charges. What would be the Journal entry for dishonour of Bill in the books of D ?

**Explanation:**

H A/c Dr. 8,000 ( 7100 + 900 )

To Bills Receivable A/c 7,100

To Cash A/c 900