Question -
Answer -
When the drawee of the bill of exchange is unable to complete the payment on the date of maturity of the bill, it is known as dishonour of bill of exchange. With this liability of the acceptor is re-established and he/she becomes a debtor again. To reflect the changes, the receipt of bill of exchange should be reversed.
The following entries will be made in books of holder/drawer (Nonpayment of noting charges):
| Drawee A/c | Dr. |
| To Bills Receivable A/c | |
| (Bill of exchange dishonoured) | |
| | |
Entry in the books ofdrawee:
| Bills Payable A/c | Dr. |
| To Drawer | |
| (Bill of exchange dishonoured) | |
Notary public charges a fee for keeping proof a dishonoured bill. These charges are beared by the drawee of the bill.
Following piece of information are noted by the notary public.
1. Amount and date of the bill
2. Possible Reason for dishonouring of bill
3. Fees charged for Noting
Entries of noting charges in the books of drawer (Payment done for noting charges):
| Drawee | Dr. |
| To Bills Receivable A/c | |
| To Cash A/c (Noting charges) | |
| (Bill of exchange dishonoured and Noting charges paid) | |
In the books ofdrawee:
| Bills Payable A/c | Dr. |
| Noting charges A/c | Dr. |
| To Drawer | |
| (Bill of exchange dishonoured and Noting charges due) | |