Bill discounted Dishonoured Journal Entries

If you want to understand the concept of Bill discounted dishonoured journal entries, first learn the bill discounted with bank and its journal entries at here and then back here to learn.

Bill discounted dishonoured means bill holder has discounted from bank by debiting bank charges in the form of discount but at the time of maturity when bank demanded money from drawee and drawee has no money and did not pay to bank, then it will called bill discounted dishonoured. At the time, bank will go to notary office for noting this dishonoured. Now, bank will pay the noting fees on the behalf of bill holder. and bill holder will take same amount from drawee who accepted same bill for payment. Now we pass the journal entries

In the books of Drawer

Drawee Account Debit

Bank Account Credit

Logic : Due to dishonored bill.  Bill will no value. Drawee will make drawee as asset. So, it will increase his total asset. So, drawee account will debit. Our bank asset will decrease with ( payment of bill receivable money + noting charges ) So, it will credit

In books of Bank 

Drawer Account Debit

Bill Receivable Account Credit

Logic : Bank has account of Drawer and it has money. Bank will deduct same money from his account and debit of his account because bill dishonoured. Entry is clear showing this.

In the Books of Drawee

Bill Payable Account Debit

Noting Charges Account Debit

Drawer Account Credit

Logic : Drawee has now direct liability of drawer and also has faced loss of noting charges and bill payable liability has decreased. So, b/p account and noting charges account will debit and drawer account will credit.

Related Contents 

1. Renewal of Bill Journal Entries 
2. Bill Dishonour Journal Entries 
3. Bill Sent for Collection with Bank Journal Entries 
4. Bill Discounting with Bank Journal Entries
5. Journal Entries for Endorsement of Bill
6. Journal Entries of Bill of Exchange
7. Accounting of Bill of Exchange 

Reference

11th Class Accounting eBook