Financial Accounting · Bills of Exchange

Journal Entries for Bills of Exchange: Drawer and Drawee

Updated 10 October 2026 · Fact-checked

A bill of exchange is recorded by the drawer as Bills Receivable and by the drawee as Bills Payable. On acceptance, the drawer debits Bills Receivable and credits the drawee; the drawee debits the drawer and credits Bills Payable. On honour at maturity, the drawer debits Bank and credits Bills Receivable; the drawee debits Bills Payable and credits Bank.

Understand Accounting Treatment of Bills: Drawer and Drawee Entries

A bill of exchange is a written order by the drawer asking the drawee to pay a fixed sum to a named person on a fixed date. It becomes a bill only when the drawee accepts it by signing. Until acceptance, there is no entry for the bill itself.

The drawer is usually the seller who is owed money. After acceptance, the debt owed by the drawee does not vanish. It changes form: from an open account (debtor) to a written promise (bill). So the drawer swaps the Debtor for Bills Receivable. The drawee swaps the Creditor for Bills Payable.

Think of it as a simple exchange of one asset for another in the drawer's books, and one liability for another in the drawee's books. Bills Receivable is an asset. Bills Payable is a liability. Neither is an expense or income.

A drawer can retain the bill until the due date (maturity) and then present it for payment. The due date is the date of maturity, found by adding the term and three days of grace to the date of the bill. If the drawee pays, the bill is honoured. Cash or bank is received by the drawer and paid by the drawee, and the bill accounts are closed. This page covers drawing, acceptance, retention and honour. Discounting, endorsement and dishonour are separate topics.

Key rules to remember

Drawer: on acceptance: Bills Receivable A/c Dr. ; To Drawee's (Debtor's) A/c; Debtor is replaced by the bill. Amount is the face value of the bill.
Drawee: on acceptance: Drawer's (Creditor's) A/c Dr. ; To Bills Payable A/c; Creditor is replaced by the bill.
Drawer: honour on due date: Bank A/c Dr. ; To Bills Receivable A/c; Use Cash A/c if the bill is paid in cash.
Drawee: honour on due date: Bills Payable A/c Dr. ; To Bank A/c; Use Cash A/c if paid in cash.
Due date: Date of bill + term + 3 days of grace; Count months by calendar. If the due date is a public holiday, under the Negotiable Instruments Act, 1881 (s.25) the bill is due on the preceding business day only if the holiday is declared after the bill is drawn (an emergency holiday). Otherwise it falls due on the next business day. Follow the question's instruction.
Credit sale followed by a bill: Sale entry first: Debtor A/c Dr. ; To Sales A/c. Then acceptance entry.; Bill replaces the debtor, so the sale entry must exist before the bill entry.

How to solve Accounting Treatment of Bills: Drawer and Drawee Entries questions

Use the same routine for any bills question. It keeps you from mixing up the two sets of books.

1Read which books you are asked for: drawer, drawee, or both. Write the heading clearly for each set.
2Identify the drawer and the drawee. The drawer is the one who is owed money and signs the bill; the drawee accepts it.
3Pass the transaction entry first if goods were sold or bought on credit. The bill does not replace Sales or Purchases.
4Pass the acceptance entry. Drawer: Bills Receivable Dr., Drawee Cr. Drawee: Drawer Dr., Bills Payable Cr.
5Find the due date by adding the term and 3 days of grace. Note if the due date falls in the period you are asked about.
6Pass the honour entry on the due date. Drawer: Bank Dr., Bills Receivable Cr. Drawee: Bills Payable Dr., Bank Cr.
7Add narrations briefly and cross-check that each bill appears on both sides, opened and closed, for the same amount.

Quickest way: Swap-and-close shortcut

When to use it: Use this when a short journal question gives many bills and you have little time.

Remember: the bill swaps with the personal account. Drawer swaps Debtor for Bills Receivable. Drawee swaps Creditor for Bills Payable.
On the due date, the bill account is closed against Bank. Receivable is credited, Payable is debited.
Write only the account names and amounts first, then narrations if time remains.
Check that Bills Receivable of the drawer equals Bills Payable of the drawee for each bill.

Common mistakes in Accounting Treatment of Bills: Drawer and Drawee Entries

Debiting Bills Receivable in the drawee's books
Students remember only the word bill and forget which side they are on.
Fix: Ask who owes money. The drawee owes, so it is Bills Payable. The drawer is owed, so it is Bills Receivable.
Passing an entry when the bill is only drawn and not yet accepted
The drawer sends the bill, so it feels like a transaction.
Fix: Record entries only on acceptance. If the question says the bill is accepted, pass the entry.
Crediting Sales or Purchases on acceptance
Students link the bill with the original credit transaction.
Fix: The sale or purchase is already recorded. The bill entry only touches the personal account and the bill account.
Wrong due date by ignoring grace days
Students count the term but forget the 3 days of grace.
Fix: Always add 3 days after the term, unless the question states the bill is payable on demand or the date is already given as the due date.
Showing a bill honoured by debiting the personal account
Students think the debtor or creditor account is still open.
Fix: The personal account was already closed on acceptance. On honour, use Bank and the bill account only.
Mixing the books when both drawer and drawee are asked
Entries are written in a single list without headings.
Fix: Write separate headings and use a two-column layout of drawer and drawee so each entry is clearly placed.

Worked examples

Example 1

On 1 January 2026, Ramesh Traders sold goods worth ₹50,000 to Suresh & Co. on credit. Ramesh drew a 3-month bill for the full amount on Suresh on the same date. Suresh accepted it and returned it. Ramesh retained the bill until maturity. The bill was honoured on the due date. Pass journal entries in the books of both parties. Ignore the due date's holiday.

Show the solution

Due date: 1 January 2026 plus 3 months is 1 April 2026. Add 3 days of grace, so the due date is 4 April 2026.
Books of Ramesh (drawer), on 1 January 2026: Suresh & Co. A/c Dr. ₹50,000; To Sales A/c ₹50,000.
On acceptance, 1 January 2026: Bills Receivable A/c Dr. ₹50,000; To Suresh & Co. A/c ₹50,000.
On 4 April 2026: Bank A/c Dr. ₹50,000; To Bills Receivable A/c ₹50,000.
Books of Suresh (drawee), on 1 January 2026: Purchases A/c Dr. ₹50,000; To Ramesh Traders A/c ₹50,000.
On acceptance, 1 January 2026: Ramesh Traders A/c Dr. ₹50,000; To Bills Payable A/c ₹50,000.
On 4 April 2026: Bills Payable A/c Dr. ₹50,000; To Bank A/c ₹50,000.

Answer: Ramesh: Bills Receivable ₹50,000 is created on 1 January 2026 and closed against Bank on 4 April 2026. Suresh: Bills Payable ₹50,000 is created on 1 January 2026 and closed against Bank on 4 April 2026.

Example 2

Meera Enterprises owes Kiran Brothers ₹80,000. On 10 March 2026, Kiran drew a 2-month bill on Meera for ₹80,000, which Meera accepted on the same day. Kiran retained the bill and presented it on the due date; Meera paid by cheque. Give the journal entries in both sets of books.

Show the solution

Due date: 10 March 2026 plus 2 months is 10 May 2026. Add 3 days of grace, so the due date is 13 May 2026.
Books of Kiran (drawer), on acceptance, 10 March 2026: Bills Receivable A/c Dr. ₹80,000; To Meera Enterprises A/c ₹80,000.
On 13 May 2026: Bank A/c Dr. ₹80,000; To Bills Receivable A/c ₹80,000.
Books of Meera (drawee), on acceptance, 10 March 2026: Kiran Brothers A/c Dr. ₹80,000; To Bills Payable A/c ₹80,000.
On 13 May 2026: Bills Payable A/c Dr. ₹80,000; To Bank A/c ₹80,000.
No entry is needed for the original credit transaction here because the debt already exists in the accounts.

Answer: Kiran: Bills Receivable Dr. ₹80,000 on 10 March 2026; Bank Dr. ₹80,000 on 13 May 2026. Meera: Kiran Brothers Dr. ₹80,000 and Bills Payable Cr. ₹80,000 on 10 March 2026; Bills Payable Dr. ₹80,000 and Bank Cr. ₹80,000 on 13 May 2026.

Exam tips

In MCQs, the usual trap is the account name. Check whether the question asks for the drawer's or drawee's books before choosing Bills Receivable or Bills Payable.
In written answers, show the due date calculation in a separate line. It earns method marks even if a later entry slips.
Use a clear heading for each party and give each entry a short narration. Presentation helps step marks.
Read the wording: accepted, retained, honoured. Each word tells you which entry is needed and which is not.
If the due date is not asked, still check it. A bill may fall due after the accounting year-end and then stays in the balance sheet.

Practice questions from Bills of Exchange

Accounting Treatment of Bills: Drawer and Drawee Entries in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA FoundationAccounting Treatment of Bills in Books of Drawer and Drawee

Accounting Treatment of Bills: Drawer and Drawee Entries: frequently asked questions

What is the journal entry for a bill retained till maturity?

On acceptance, the drawer debits Bills Receivable and credits the drawee. The drawee debits the drawer and credits Bills Payable. On the due date, the drawer debits Bank and credits Bills Receivable, and the drawee debits Bills Payable and credits Bank.

Is Bills Receivable an asset or a liability?

Bills Receivable is an asset. It is the amount the drawer will receive from the drawee. Bills Payable is a liability. It is the amount the drawee must pay.

Do I pass an entry when the bill is drawn but not accepted?

No. Entries are passed only when the drawee accepts the bill. Until then, the debtor and creditor accounts stay as they are.

Do grace days apply to every bill?

The usual rule is to add 3 days of grace to the term for a bill payable after a fixed period. Bills payable on demand or at sight have no grace days. Follow the question if it gives the due date or says otherwise.