Accommodation Bill Journal Entries

$show=home

Before understanding accommodation of bill journal entries, you should know about accommodation bill. Accommodation means the place where two or more people spends their time. It means to use any thing for mutual benefit.

Now, understanding of accommodation bill has become so simple for you. It means to use bill money for mutual benefits of drawer and drawee. There is no consideration behind the drawing and accepting of bill. We all know, bill is written by person if he sold goods to his debtor on credit. For getting his amount, he writes the bill and give order to debtor to pay and creditor accepted it. That is called trade bill. If there is no such consideration behind the bill, then this bill will be called accommodation bill. There are two situations of writing this bill.

1. If Drawee wants to help to drawer

2. If Drawer and drawee wants to get money from accommodated bill which is discounted from bank.

( Remember : Both drawer and drawee has no money in pocket at the time of drawing and accepting the bill and same bill is discounted from bank and same money is used by mutual benefits of drawer and drawee as per above one and two case. )

Accommodation bill journal entries are almost equal to discounted bill with bank journal entries and dishonored discounted bill journal entries.

1. When Drawer will Receive Full Amount at the Time of Drawing of Accommodation Bill (As per agreement )

When Drawer discounts accommodation Bill from Bank
In the books of Drawer

Bank Account Debit

Discounting Charge Account Debit

Bill Receivable Account Credit

In the Books Drawee

There will not journal entry of this.

At maturity, Drawer will Send money to Drawee for paying accommodation bill

( Because drawer did not sell to drawee anything. So, it is the duty of drawer to refund money on the date of maturity )

In the books of Drawer

Drawee Account Debit

Bank Account Credit

In the Books Drawee

Bank account Debit

Drawer Account Credit

When drawee pay money to bank

Bill payable account Debit

Bank Account Credit

2. When Drawer will Receive Proportion of Total Amount at the Time Discounting of Accommodation Bill ( (As per agreement ))

( Suppose, drawer and drawee will distribute 50 : 50 discounted amount of their accommodation bill )

When Drawer discounts accommodation Bill from Bank
In the books of Drawer

Bank Account Debit 90

Discounting Charge Account Debit 10

Bill Receivable Account Credit 100

In the Books Drawee

no entry

When drawer will send 50% discounted amount of accommodation bill to drawee

in the books of drawer

Drawer account Debit 50

bill discounted Credit 5

Bank Account Credit 45
In the books of drawee

Drawee will receive his portion from drawer

Bank Account Debit 45

Discount Account Debit 5

Drawer Account Debit 50

At maturity, Drawer will Send money to Drawee for paying accommodation bill

( Because drawer did not sell to drawee anything. So, it is the duty of drawer to refund money on the date of maturity )

In the books of Drawer ( Paying of rest proportion )

Drawee Account Debit 50

Discount Account Credit 45

Bank Account Credit 5

In the Books Drawee ( receiving of rest proportion )

Bank account Debit 45

Discount account Debit 5

Drawer Account Credit 50

When drawee pay money to bank

Bill payable account Debit 100

Bank Account Credit 100

Related Contents