Financial Accounting · Bills of Exchange

Bills Receivable and Bills Payable Books and Ledger Accounts

Updated 10 October 2026 · Fact-checked

The bills receivable book lists bills you receive from customers; the bills payable book lists bills you accept for suppliers. Their totals are posted to the Bills Receivable and Bills Payable accounts, and each bill to the party's account. The year-end balance is only the unmatured bills still in hand or still to be paid.

Understand Bills Receivable and Payable Books and Ledger Accounts

A business that deals in bills of exchange does not want to scatter bill entries across the journal. So it keeps two subsidiary books. The Bills Receivable Book records every bill you receive, as drawer or as payee. The Bills Payable Book records every bill you accept as a debtor. Each book is a list with one line per bill, and the journal is not needed for these entries.

A typical Bills Receivable Book has these columns: serial number, date received, from whom received, drawer, acceptor, date of the bill, term, due date, amount, where payable, date and manner of disposal (collected, discounted, endorsed, dishonoured), and ledger folio. The Bills Payable Book has the same layout, with the party to whom the bill is given in place of the party from whom it is received.

Posting is simple. In the Bills Receivable Book, the total is debited to Bills Receivable A/c and each individual amount is credited to the customer's account. In the Bills Payable Book, the total is credited to Bills Payable A/c and each individual amount is debited to the supplier's account. The two ledger accounts therefore show, on one side, bills coming in or going out, and on the other side, how each bill ended.

The Bills Receivable A/c is debited when a bill is received and credited when it is collected on maturity, discounted, endorsed to a creditor, or dishonoured. A discounted bill is credited at its full face value, and the discount is charged to Discount A/c. The closing balance is therefore only the unmatured bills still in your hand. Bills discounted but not yet matured are not in this balance. You show them as a contingent liability in a note, because the bank can claim from you if the acceptor defaults.

The Bills Payable A/c is credited when you accept a bill and debited when you pay it, retire it early, or it is dishonoured. Its closing balance is the amount of accepted bills not yet due. At the year end, you find this balance either by working the ledger account or by listing bills and checking which due dates fall after the balance sheet date. A bill is due on the date of drawing plus its term plus three days of grace. Bills payable at sight or on demand get no grace days.

Key rules to remember

Due date of a bill: Due date = Date of bill + Term + 3 days of grace; Count months by the calendar. No grace days for bills payable on demand or at sight. If the maturity date is a public holiday, the bill falls due on the preceding business day (s.25 NI Act); if the day is an emergency holiday it falls due on the next day.
Closing balance of Bills Receivable: Closing BR = Opening BR + Bills received − (Collected + Discounted + Endorsed + Dishonoured); Gives unmatured bills in hand. Unmatured discounted bills are shown separately as a contingent liability.
Closing balance of Bills Payable: Closing BP = Opening BP + Bills accepted − (Paid on maturity + Retired early + Dishonoured); Gives accepted bills not yet due.
Posting from Bills Receivable Book: Dr Bills Receivable A/c (total); Cr each customer (individual bill); The book is a subsidiary book, so no journal entry is needed for receipt of bills.
Posting from Bills Payable Book: Cr Bills Payable A/c (total); Dr each supplier (individual bill); Mirror image of the Bills Receivable Book.
Discount on discounting a bill: Discount = Face value × Rate % × Unexpired period (in years); Unexpired period runs from the date of discounting to the legal due date, including grace days.
Entry on discounting a bill: Dr Bank (face value − discount); Dr Discount A/c; Cr Bills Receivable A/c (face value); The Bills Receivable A/c is credited with the full face value.

How to solve Bills Receivable and Payable Books and Ledger Accounts questions

Use this method for any question that asks for the bill books, ledger accounts or year-end balances.

1Read the data and note the year-end date and the opening balances of Bills Receivable and Bills Payable.
2Separate receivable items from payable items. Bills received and bills accepted must never be mixed.
3For each bill, work out the legal due date (date + term + 3 days) when dates are given, and mark whether it falls on or before the year-end date.
4Enter in the Bills Receivable A/c: debit side for opening balance and bills received; credit side for each disposal (collected, discounted, endorsed, dishonoured) at full face value.
5Enter in the Bills Payable A/c: credit side for opening balance and bills accepted; debit side for payments, early retirements and dishonours.
6Balance each account. The balance carried down is the unmatured bills. Check it against your list of bills by due date.
7Post individual bills to the party accounts and show the contingent liability for unmatured discounted bills as a note.
8Show discount, rebate and any interest as separate items in the Profit and Loss Account, not inside the bill accounts.

Quickest way: Balancing figure and due-date check

When to use it: Use when the question gives totals (received, collected, discounted and so on) and asks for the closing balance or the full account under time pressure.

Write the account in T-form with only the totals and leave the closing balance blank.
Put the opening balance and receipts on one side, and every disposal on the other side at face value.
Find the closing balance as the difference between the two sides.
If dates are given, confirm by checking only the bills with a legal due date after the year end. Their total must equal your balance.
Add the unmatured discounted bills as a contingent liability note and finish.

Common mistakes in Bills Receivable and Payable Books and Ledger Accounts

Debiting or crediting the wrong account when posting the books, for example crediting Bills Receivable A/c with the book total.
Students remember that a bill is received but forget that the total is a debit to the asset and the customer is credited.
Fix: Remember that Bills Receivable is an asset, so receipt is a debit. Bills Payable is a liability, so acceptance is a credit. The party account always takes the opposite side.
Crediting Bills Receivable A/c with the net amount received from the bank on discounting.
The bank receipt is smaller than the face value, so students record only the cash.
Fix: Credit Bills Receivable at the full face value. Debit the difference to Discount A/c.
Including discounted bills that have not yet matured in the closing Bills Receivable balance.
The bill is still alive, so it seems to still be in hand.
Fix: Once discounted, the bill has left your hands. Do not include it in the closing balance. Show it as a contingent liability in the notes.
Forgetting the three days of grace when finding the due date, so a bill is treated as matured or unmatured wrongly.
Students calculate only date plus term.
Fix: Always add 3 days unless the bill is on demand or at sight. A bill drawn on 28 December for 3 months falls due on 31 March, the balance sheet date, so it is not outstanding after the year end. Without grace days it would look due on 28 March. Now take a bill drawn on 30 December for 3 months: grace days move its due date from 30 March to 2 April, which is after the year end, so it is unmatured.
Crediting Bills Receivable again when a discounted bill is dishonoured.
Students treat dishonour as a fresh disposal of the bill.
Fix: The bill was already credited on discounting. On dishonour, debit the customer (with the bank charges) and credit Bank. Bills Receivable is untouched. A bill dishonoured while still in hand is credited to Bills Receivable.
Treating a rebate received on early payment as an adjustment to the Bills Payable balance.
Students show only the cash paid.
Fix: Debit Bills Payable at full face value. Credit Bank with the cash paid and credit Discount Received for the rebate.

Worked examples

Example 1

From the following, prepare the Bills Receivable Account of Sharma Traders for the year ended 31 March 2027 and find the unmatured bills in hand. Opening Bills Receivable ₹40,000. Bills received from customers during the year ₹3,10,000. Bills collected on maturity ₹2,00,000. Bills discounted with the bank ₹50,000 (discount charged ₹1,500), of which ₹30,000 remain unmatured at year end. Bills endorsed to creditors ₹30,000. A bill of ₹20,000 dishonoured by the acceptor while in hand.

Show the solution

Debit side: Balance b/d ₹40,000 and Customers (bills received) ₹3,10,000. Total ₹3,50,000.
Credit side at face value: Bank (collected) ₹2,00,000; Bank and Discount (discounted) ₹50,000, made up of cash ₹48,500 and discount ₹1,500; Creditors (endorsed) ₹30,000; Customer (dishonoured) ₹20,000.
Total disposals = 2,00,000 + 50,000 + 30,000 + 20,000 = ₹3,00,000.
Closing balance c/d = 3,50,000 − 3,00,000 = ₹50,000. This is a balancing figure; in an exam, check it against the list of bills by due date.
Entry for discounting: Dr Bank ₹48,500; Dr Discount A/c ₹1,500; Cr Bills Receivable A/c ₹50,000.
Contingent liability: ₹30,000 for discounted bills not yet matured, shown as a note and not in the account.

Answer: Unmatured bills in hand at 31 March 2027 = ₹50,000 (Bills Receivable closing balance, found as the balancing figure). Contingent liability for discounted bills = ₹30,000. The full discount of ₹1,500 is charged to the Profit and Loss Account.

Example 2

From the following, prepare the Bills Payable Account of Mehta & Co. for the year ended 31 March 2027. Bills Payable on 1 April 2026 ₹25,000. Bills accepted during the year ₹1,80,000. Bills paid on maturity ₹1,45,000. A bill of ₹12,000 was retired before its due date for ₹11,800 cash. A bill of ₹8,000 was dishonoured by Mehta & Co. on its due date and not paid.

Show the solution

Credit side: Balance b/d ₹25,000 and Bills accepted (from the Bills Payable Book total) ₹1,80,000. Total ₹2,05,000.
Debit side at face value: Bank (paid on maturity) ₹1,45,000; Bank ₹11,800 and Discount Received ₹200 (retired early) ₹12,000; Supplier's account (dishonoured) ₹8,000.
Total debits = 1,45,000 + 12,000 + 8,000 = ₹1,65,000.
Closing balance c/d = 2,05,000 − 1,65,000 = ₹40,000.
Entry for early retirement: Dr Bills Payable A/c ₹12,000; Cr Bank ₹11,800; Cr Discount Received ₹200.
Entry for dishonour: Dr Bills Payable A/c ₹8,000; Cr Supplier's A/c ₹8,000. The supplier is again a creditor for ₹8,000.

Answer: Bills Payable closing balance at 31 March 2027 = ₹40,000 (accepted bills not yet due). Discount received of ₹200 is an income in the Profit and Loss Account.

Exam tips

Look for the words discounted, endorsed and dishonoured. Each changes the credit side of Bills Receivable differently, so list them before you write the account.
Write the legal due date beside every bill in date-based questions. The three grace days decide matured versus unmatured, and examiners set one bill near the year end.
In MCQs, the common traps are the balance including discounted bills and the full face value versus net cash received. Check these before choosing.
In written answers, draw the T-form account neatly with dates and narrations, then give a one-line note for the contingent liability. Step marks come from correct entries and the balancing figure.
Treat the Bills Receivable and Bills Payable Books as subsidiary books. If a question asks for a journal entry for receipt or acceptance of a bill, check whether the books are meant to be used first.

Practice questions from Bills of Exchange

Bills Receivable and Payable Books and Ledger Accounts 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

Bills Receivable and Payable Books and Ledger Accounts: frequently asked questions

What is the difference between the Bills Receivable Book and the Bills Receivable Account?

The Bills Receivable Book is a subsidiary book that lists every bill received, with its details and due date. The Bills Receivable Account is the ledger account that receives the book's total on the debit side. It shows how each bill was disposed of and the closing balance.

Are discounted bills shown in the Bills Receivable balance at the year end?

No. On discounting, the Bills Receivable Account is credited with the full face value, so the bill leaves the balance. If it has not yet matured at the year end, show it as a contingent liability in the notes.

How do I find the unmatured bills at the year end?

Take opening bills plus bills received, and deduct bills collected, discounted, endorsed and dishonoured. The result is the closing balance. You can check it by listing bills whose legal due date, including three days of grace, falls after the year-end date.

Where is the discount on a bill shown?

Discount on discounting a bill is an expense and goes to the Discount A/c, then to the Profit and Loss Account. A rebate received on paying a bill early is an income and goes to the Discount Received A/c.