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Retirement of a Bill

Retirement of a bill means making the payment of a bill before the date of maturity. Due to the premature payment done by the drawee, the drawer allows some discount as consideration. Such a discount at the time of retirement of a bill is an income for the drawee and is an expense for the drawer.

The journal entries will be:

Illustration 6


X sells goods for ₹ 2,000 to Y and draws a bill for three months for the amount. Y accepts it and returns to X. Y retires his acceptance under a rebate of ₹100. Give necessary journal entries in the books of X and Y.



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