Bill of Exchange

The journal entries recorded in case of renewal for the cancellation of the old bill, for interest and for the acceptance of the new bill in the books of the drawer and drawee are given below: Transaction Books of Drawer Books of Drawee Cancellation of old bill Drawee’s A/c Bills Payable A/c To Drawer’s A/c Interest Drawee’s A/c Interest A/c To Interest A/c To Drawer’s A/c New bill Bill Receivable A/c Drawer’s A/c To Drawee’s A/c To Bills Payable A/c For example on February , Ravi sold goods to Mohan for Rs. , ; Rs. , were paid by Mohan immediately and for the balance he accepted three months bill drawn upon him by Ravi. On the date of maturity of the bill Mohan requested Ravi to cancel the old bill and a new bill upon him for a period of months.

He further agreed to pay interest in cash to Ravi @ % p.a. Ravi agreed to Mohan’s request and cancelled the old bill and drew a new