CMA Foundation · Fundamentals of Financial and Cost Accounting · Bills of Exchange
When a trader accepts a bill of exchange drawn on him by his supplier for goods purchased on credit, which account is credited in the books of the drawee (acceptor) on acceptance?
Bills Payable Account is credited in the drawee's books on acceptance, because the acceptor now owes the amount through the accepted bill instead of through the open account of the drawer. The drawer's personal account is debited, so the liability shifts from creditor to bills payable.
- ABills Receivable Account
- BBills Payable AccountCorrect
- CCreditor's (Drawer's) Personal Account
- DPurchases Account
Explanation
On acceptance, the drawee's liability to the supplier is replaced by a liability on the bill. The entry is: Drawer's A/c Dr, To Bills Payable A/c. Bills Receivable would be credited only in the drawer's books if the bill were endorsed or discharged, not by the acceptor.
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