Bill Sent to Bank for Collection Journal Entries

When debtor or bill of exchange holder sends the bill to bank by saying that his account will be credited when he will get money from his creditor on due date, then that bill is called Bill sent to bank for collection. In these bills, bank will not immediate credit bill holder's account because it is not discounting of bill with bank. So, there will not accounting treatment like discounting or bill with bank or endorsement of bill.

It is simply conversion one current asset to other current asset upto liquid asset of bill holder. Bill holder will open Bill Sent to Bank Collection Account for recording this type transaction.

Now, come and learn its journal entries.

When Bill Sent to Bank for Collection

In the Books of Bill Holder

Bills Sent for Collection Account Debit

Bill Receivable Account Credit

Logic : Because B/R was the asset of bill holder. Now, it has deposited into bank for collection and bank has give its receipt for base of new current asset that is Bill sent for collection: So, it is increase of asset. Bill sent for collection account debit and Bill receivable account will credit.

In the Books of Creditor

There will no journal entry in the book of Creditor. Because no transaction has happened in the creditor's business.

When Creditor Pays to Bank

In the Books of Bill Holder

Bank Account Debit

Bill Sent for Collection Account Credit

Logic : By paying the money, bank has credited bill holder's account. With this, bill holder's current asset ( Bank ) has increased. So, bank account will debit and now, current asset of bill sent for collect has decreased. So, this account has credited

In the Books of Creditor

Bill Payable Account Debit

Bank Account Credit

Logic : At the maturity, creditor has paid to bill holder. There is not issue it is in the hand of person or bank. By paying, creditor has decreased his current liability. Decreased of current liability is debit. So, bill payable account debit and bank because current asset and it has also decreased. So, it will be credited.

Related Contents 

1. Bill Discounting with Bank Journal Entries
2. Journal Entries for Endorsement of Bill
3. Journal Entries of Bill of Exchange
4. Accounting of Bill of Exchange 

Reference

11th Class Accounting eBook