Dishonour of Bills of Exchange

When a bill is dishonored, the drawer must reverse the credit given to the drawee. Therefore, the drawer debits the acceptor's (drawee's) account to record the debt again.

Upon dishonor, the drawee is liable for the original bill amount plus the noting charges paid by the drawer. Thus, 23000 + 100 = 23100.

In the books of the drawee, the bank or the holder is not credited for noting charges; rather, the drawee debits Noting Charges and credits the Drawer's account. Therefore, neither bank nor noting charges account is credited by the drawee.

When a bill is endorsed, the drawer transfers the bill to an endorsee. The drawer credits the Bills Receivable account because the asset is leaving their possession.

In the books of the drawee, when a bill is dishonored, the liability that was previously removed (Bills Payable) must be reinstated. Therefore, the Bills Payable account is debited.

When Bill sent for collection is Dishonored amount receivable from the Bank is cancelled hence Bank for Collection A/c is Credited.

Noting charges are the fees levied by notary public authority for recording the facts of dishonour of the bill.

The authority appointed by the Government of India for noting down the reasons of dishonour is called Notary Public Authority.

In the books of a drawer, noting charges are neither credited nor debited. These noting charges are a loss for the drawee. Thus, he needs to debit it in his accounting book and credit cash A/c. The account of noting charges for a drawer is neither a profit nor a loss.

Dishonour of a bill of exchange occurs when the drawee fails to settle the payment on the date of maturity. When the bill of exchange is dishonoured, the liability of the acceptor is restored (he/she becomes the debtor again).

When a Bill of Exchange is dishonoured, in order to prove the fact, the drawer (or holder) may get the bill of exchange noted and protested through a public official known as “Notary Public” Noting is the recording of the fact of dishonour by a Notary public which becomes an evidence of dishonour.

Noting charges are the amounts paid by the drawer to notary , who warns the drawee of the bill to get clear in a specific time period .

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| Dishonour of bill :-                 | Drawee’s A/c | Dr. | | |
| | To Bills Receivable A/c | | | |
| | (Being dishonor of bill) | |

When a bill sent for collection is dishonored, the bank credits the drawer's account (or the collection account) to reflect the reversal of the collection process.

The noting charges are paid by the drawer in cash. Therefore, the Cash account is credited by the amount of the noting charges, which is 100.

When a bill of exchange discounted with a bank gets dishonoured at the due date, in that case, the following entry is recorded. L.F. This entry implies that on dishonour the drawee again becomes the debtor of the drawer and bank becomes the creditor of the drawer (due to non-payment by drawee on due date)

The bill amount is 1500. The dividend is 0.25 in a rupee. 1500 * 0.25 = 375. The discount is irrelevant to the amount recovered from the insolvent estate.

When an endorsed bill is dishonored, the drawer must debit the person from whom they received the bill (the endorser) to reverse the transaction.

Insolvency of the drawee means they are unable to pay their debts, which legally results in the dishonor of the bill of exchange.

Noting charges are an expense for the drawee because they are responsible for the dishonor of the bill. Therefore, the drawee debits the Noting Charges account.

Dishonour of bill happnes when the acceptor of the bill fails to make the payment on the date of maturity of the bill. Hecne, laibility of the acceptor is restored. Entries made for recording dishonour of the bill of exchange are reverse of the entries of recording drawing of the bill.

A bill which is not an inland bill, is deemed to be a foreign bill. 

When bill of exchange is dishonoured then in order to prove this fact to drawer may get it noted and protested through  a public official  known as a notary  public for which it charges its fees which called noting charges.such charges are recovered from the party responsible for the dishonour and when noting charges is paid at the dishonour of the bill the drawer always debit the noting charges account the journal entry is as :-

The notary public is hired by the holder of the bill to record the dishonor. Therefore, the holder is initially responsible for paying the notary's fee.

Noting by a notary public serves as legal proof that the bill was presented for payment and was dishonored, which is necessary for legal action.

Noting charges are legally the responsibility of the drawee, as they are the party who failed to meet the obligation of the bill.

A noting fee is the payment made to a notary public for the official recording (noting) of the fact that a bill of exchange has been dishonored.

When a Bill of Exchange (BOE) is dishonoured, then in order to prove this fact, the drawer (or the bill holder) may get it noted and protested through a public official known as 'Notary Public' for which it charges its fees which is called Noting Charges.

Noting charges are incurred due to the drawee's failure to pay the bill on the due date; therefore, the drawee is ultimately responsible for this expense.

If there is dishonour, or fear of dishonour, the bill will be given to a public official known as “Notary Public”. The amount of noting charges is recoverable from the party which is responsible for dishonour.

Since the drawee is responsible for the dishonor, they must record the noting charges as an expense by debiting the Noting Charges account in their books.

In an accommodation bill, the parties share the proceeds and therefore also share the costs, including the discount charged by the bank, in their agreed ratio.

The bill is payable 2 months after sight. Sight date is 24.11.2013. Two months later is 24.01.2014. Adding 3 days of grace gives 27.01.2014.

The bill is dated 25.11.2013 for 60 days. Adding 60 days: 5 days in Nov (30-25), 31 days in Dec, and 24 days in Jan, totaling 60 days, which lands on 24.01.2014. Adding 3 days of grace gives 27.01.2014.

Option A is correct.

Under the Negotiable Instruments Act, if the drawer and the acceptor are the same person (or the instrument is otherwise unenforceable against the drawer), notice of dishonor is not required.

When a bill is discounted, the bank holds the instrument. If it is dishonored, the bank pays the notary for the protest and subsequently recovers this cost from the drawer.

The person who draws the bill is called the drawer. He gives the order to pay money to third party. The party upon whom the bill is drawn is called the drawee. He is the person to whom the bill is addressed and who is ordered to pay.

Dishonour by non-acceptance occurs when a bill is presented for acceptance and the drawee refuses or fails to accept it. Non-payment is distinct from non-acceptance.

When a discounted bill is dishonored, the bank deducts the full face value of the bill plus any noting charges incurred from the drawer's account. The discount amount is irrelevant at the time of dishonor.

Y (the drawer) endorsed the bill to Z. When dishonored, Y becomes liable to Z. Therefore, Y must credit Z's account to show the liability to the endorsee.

Upon dishonor of a discounted bill, the bank reverses the transaction by debiting the drawer's account for the full face value of the bill. The discount charged earlier is a separate expense and does not affect the face value reversal.

For a bill 'after sight', the maturity period starts from the date of acceptance (21.2.13). 30 days from 21.2.13 is 23.3.13. Adding 3 days of grace results in 26.3.13.

Calculation of discount for 3 months @ 12% p.a. 

If due date comes on emergency holiday need to take next working day as due date therefore here  14th Dec is due date.

Discount = Principal * Rate * Time. 1,50,000 * 0.12 * (2/12) = 3,000.

The bill is drawn on 29th Jan for one month. One month from 29th Jan is 28th Feb (or 1st March in a leap year, but standard practice uses the same date). Adding 3 days of grace to 28th Feb (or 1st March) leads to 3rd March.

30 days from 10th Sept is 10th Oct. Adding 3 days of grace is 13th Oct. Wait, the question mentions 13th Dec as a public holiday. 30 days from 10th Sept is 10th Oct + 3 days = 13th Oct. The question text seems to contain a typo regarding the month (Dec instead of Oct), but 12th is the day before the holiday.

Total amount due = 1,50,000 (bill) + 1,500 (noting charges) = 1,51,500. A 2% discount on 1,51,500 is 3,030. 1,51,500 - 3,030 = 1,48,470.

The discount borne by X is the difference between the face value of the bill and the amount received from the bank. The question asks for the discount on the second bill (8,40,000 discounted for 8,20,000), which is 20,000 total. The remittance logic implies X bears the cost proportional to the funds received.

On the due date , Y failed to discharge the bills.

Interest = Principal * Rate * Time. 1,50,000 * 0.09 * (2/12) = 2,250.

Calculation of Interest is to be charged @ 18% p.a. for 3 months.

The payee is the person to whom the money is ultimately paid. Since X endorsed to Z, and Z endorsed to W, W is the current holder and the payee.

The bill is due on 4th April (3 months from 1st Jan + 3 days). Retiring on 4th March means 31 days early. Discount = 1,50,000 * 0.12 * (31/365) = 1,528. The closest option is 1,500.

Total discount is 1,200. The ratio is 3:1 (Y:X). Y's share = 1,200 * (3/4) = 900.

This involves calculating the total discount on two bills and allocating them based on the usage of proceeds. The total discount is (45,000-42,300) + (63,000-61,200) = 2,700 + 1,800 = 4,500. Proportional allocation leads to 3,000.

Calculation of discount @12% p.a. for 3 months = 150000 * 12/100 * 3/12

When a bill is dishonored, the drawer must reinstate the debt of the acceptor. Therefore, the drawer debits the acceptor's account.

Option A is the correct one.   

A bill of exchange should be duly presented for payment on the date of its maturity. The drawee is absolved of his liability if the bill is not duly presented. Proper presentation of the bill means that is should be presented on the date of maturity to the acceptor during business working hours. To establish beyond doubt that the bill was dishonoured, despite its due presentation, it may preferably to be got noted by Noting Public.It may be noted whosoever pays the noting charges, ultimately these have to be borne by the drawee. The drawee is invariably debited in the drawer's books. This is because he is responsible for the dishonour of the bill and hence he has to bear these expenses.

When the bank pays noting charges, the drawee owes that amount to the drawer, not the bank. Thus, the drawee credits the drawer's account, not the bank account.

Upon dishonor, the bank debits the drawer's account for the full face value of the bill (50,000). The discount is a separate transaction that occurred earlier.