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17.2 Double Entry Book Keeping—ISC XI
19. Discounting of Bill It means taking amount from the bank before the instrument (Bill)
becomes due for payment. Bank charges some amount called
Discounting Charges, for making the payment before due date.
20. Noting of a Bill It is a process by which the bill is presented for payment through a
Notary Public. Notary Public makes a noting to the effect that
bill is dishonoured.
21. Noting Charges Charges paid to the notary public on the dishonour of a bill to record the
facts of dishonour.

CHAPTER SUMMARY

• When a seller sells goods to a customer on credit, the customer or debtor gives a bill of exchange
duly accepted by him or a promissory note to the seller or creditor. This is known as Bill Receivable
because the creditor will get payment on this bill on maturity. From the debtor’s point of view, it is called
Bill Payable because he has to make the payment to the creditor.
• Bill of Exchange is an instrument in writing, containing an unconditional order, signed by the maker,
directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or
to the bearer of the instrument.
• Parties to the Bill of Exchange are:
(i) The Drawer—the party who makes the bill.
(ii) The Drawee—the party who accepts the bill.
(iii) The Payee—the party to whom the amount is to be paid.
• Types of Bill of Exchange are:
(i) Trade Bill—a bill drawn and accepted for a business transaction.
(ii) Accommodation Bill—a bill drawn and accepted for mutual help.
• Advantages of Bill of Exchange are:
(i) Purchases and sales of goods can be made on credit.
(ii) Funds can be made available by discounting the bill.
(iii) Recovery of dues is easier, in case bill is dishonoured.
(iv) Bill can be endorsed in settlement of dues.
(v) Receipt of payment is certain.
(vi) Convenient means of remittance.
(vii) It is a valid evidence of debt.
• The date on which the term of the bill expires is called as Due Date of the Bill.
• The date which comes after adding three days to the due date of a bill, is called the date of maturity.
• Promissory Note is an instrument in writing (not being a bank note or a currency note) containing an
unconditional undertaking signed by the maker to pay a certain sum of money only to or to the order of
a certain person or to the bearer of the instrument.
• Parties to the Promissory Note are:
(i) The Maker—the party who makes the note.
(ii) The Payee—the party to whom the amount is to be paid.
• Cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than
on demand and includes the electronic image of a truncated cheque and a cheque in the electronic form.
• Parties to the Cheque are:
(i) The Drawer—the party who makes the cheque.
(ii) The Drawee—the banker on whom the cheque is drawn and is directed to pay the amount of the cheque.
(iii) The Payee—the party to whom the amount of the cheque is to be paid.
Summary of accounting entries for Bill of Exchange is given on next page.