DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH

Name : Sreenivasa Rao B.

Designation : Lecturer in CCP
Branch : DCCP
Institute : S.U.V.R&S.R GPW, Ethamukkala
Semester : III
Subject Name : Accountancy-II
Subject Code : CCP 302
Major Topic : Bills of Exchange
Duration : 50 minutes
Sub Topic : Bills of Exchange – Renewal of a Bill –
Meaning – Accounting Treatment.
Teaching Aids : PPTs, ANIMATIONS
CCP302.46 1
Objectives

On completion of this class the student will be able to

understand
 Renewal of Bill – Meaning
 Accounting Treatment

CCP302.46 2
Recap

 If the drawee makes payment of the accepted bill

before its due date,
 the drawer will allow some amount as rebate to the
drawee for the early payment
 This process is called ‘retiring the bill under rebate’
 Rebate is a concession/discount allowed for the
early payment

CCP302.46 3
Renewal of a Bill –Meaning:

 When the acceptor of the bill is unable to meet

the bill on the maturity date,
 he requests the drawer to cancel the bill and
draw a new bill in its place
 If the Drawer agrees with the request of the
acceptor, the old bill is cancelled
 and new bill for the balance with interest, stamp
duty and other incidental expenses incurred by
the Drawer

CCP302.46 4
 Cancellation of an old bill and drawing a new bill in
its place to allow more time to the accepter for the
payment of the bill is known as Renewal of a Bill

CCP302.46 5
A bill can be renewed in any of the
following two ways.
 The old bill is cancelled and a new bill is drawn
 for the amount of the old bill plus interest for the
period of the new bill
 When the acceptor of the bill wants to make a
partial payment at the time of renewal of a bill,
 the old bill is cancelled and a new bill is drawn
 for the balance of the amount plus interest for the
period of the new bill

CCP302.46 6
Renewal entries

Entries in the books of drawer

(a) If the bill is retained by the Drawer

Drawee’s Account …….. Dr
To Bills Receivable of the
(Being the entry for cancellation of the old Bill)

CCP302.46 7
Renewal entries contd.

(b) If the Bills Receivable is discounted by the

Drawer
Drawee’s A/c Dr
To Bank A/c
(Being the amount paid on behalf of Drawee)

(c) If the Bills receivable is endorsed

Drawee’s A/c Dr
To Creditor's A/c
(Being the entry for Cancellation is old bill)

CCP302.46 8
Renewal entries
contd.
1. If the Bills received is sent to Bank for
collection
Drawee’s A/c …………. Dr
To Bills sent to Bank for collection A/c
( Being the entry for cancellation of old Bill)

• For Interest :
Drawee’s A/c ………….. Dr
To Interest A/c
(Being the entry for interest due by drawee)

CCP302.46 9
Renewal entries
contd.
1. If interest is received from Drawee in cash
Cash A/c…………. Dr
To Interest A/c
(Being interest received)

6. If the new bill is received with interest

Bills Receivable A/c ………… Dr
To Drawee’s A/c
(Being the renewed bill received)

CCP302.46 10
Renewal entries
contd.
1. If partial payment of old bill is made in cash
Cash A/c Dr
To Drawee A/c
(being the part payment received)

2. If part payment of old bill and interest is paid

in cash
Cash A/c Dr
To drawee A/c
(Being part payment along with interest paid)

CCP302.46 11
Renewal Entries in the books of
Drawee

3. For Cancellation of the old Bill

Bill payable A/c Dr
To Drawee’s A/c
(Being the old bill cancellation for renewed)

8. For Interest
Interest A/c Dr
To Drawer’s A/c
(Being interest payable to the drawer on the
amount of old bill for the period of new bill)

CCP302.46 12
Renewal Entries in the books of
Drawee
3. If interest is paid in cash
Interest A/c……… Dr
To cash A/c
(Being interest paid in cash for the extended period
of credit)
4. If a partial payment of old bill is made in cash
Drawer’s A/c…. ….. Dr
To cash A/c
(Being the part payment made)
CCP302.46 13
Renewal Entries in the books of
Drawee

5. If the new bill is accepted with interest

Drawer’s A/c……… Dr
To Bills payable A/c
(Being acceptance given to new bill for the
amount due with interest)

CCP302.46 14
Summary

 If the Drawee is unable to meet the bill on due

date he may request the drawer to cancel the
bill and draft a new bill with interest
 Cancellation of an old bill and drawing a new
bill to allow more time to the Drawee for
payment is called as Renewal of Bill
 Recording the entries in the books of Drawer
of drawee with different accounting treatment

CCP302.46 15
QUIZ

3. Bills Receivable A/c is a

a) Personal A/c
b) Real A/c
c) Normal A/c
d) None of the above

CCP302.46 16
Frequently asked questions:

1. What is a “Renewal of a Bill” ?

CCP302.46 17
Assignment

1. Write briefly about renewal of a bill

2. Solve problems on renewal of bill from your text
book

CCP302.46 18