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Bills Sent for Collection

When a person receives a bill of exchange he may decide to retain the bill till the date of maturity. But in order to ensure safety, he may send it to bank with instructions that the bill should be retained till maturity and should be realised on that date. This does not mean discounting because the bank will not credit the client until the amount is actually realised. If the bill is sent to the bank with such instructions it is known as “Bill sent for collections”.

The journal entries will be:


Note: Whenever bank charges for collecting bill then such collection charges has to be borne by the holder of the bill.
Journal entry
Collection charges A/c                   Dr.
   To Cash/Bank A/c

In the Books of the Drawee

No entries are passed for bills sent for collection in the books of drawee.

Illustration 8



X sells goods for ₹ 2,000 to Y and draws a bill for three months for the amount. Y accepts it and returns it to X. X sent the bill to bank for collection. Give necessary journal entries if:

i) The bill is met on maturity

ii) The bill is dishonoured on maturity



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