Page 5 - LESSON NOTE

8. Dishonour of Bill: When the drawee (or acceptor) of the bill fails to make

payment of the bill on the date of maturity, it is called Dishonour of Bill.
9. Noting of Bill: To obtain the proof of dishonour of a bill, it is re-sent to the
drawee through a legally authorized persons called Notary Public charges a small
fee for Providing this service known as Noting charges.
10. Retirement of a Bill: When the drawee makes the payment of the bill before
its due date it is called ‘Retirement of a bill’.
11. Renewal of a Bill: Sometimes drawee is not in the position to pay the amount
of the bill on maturity. Thus drawee request to the drawer to cancel the old bill &

write a new bill with interest and if drawer agree, new bill is drawn with new
maturity date. This process is called the ‘Renewal of Bill’. The interest may be
paid in cash or may be added in the amount of new bill.

When calculating Date of Maturity, the following point must

be considered:
(i) In case “Bill at Sight” or “Bill on demand” 3 days of grace are NOT allowed.

(ii) When the term of bill is mentioned in no of days, then
· Date of drawing the bill is not included.

· Date of payment is included in determining date of maturity.

· If date of maturity falls on a day which is public holiday; the maturity date of the
bill shall be “PROCEEDING DAY’.

· If maturity date is on an emergent holiday declared under the Negotiable
Installment Act. 1881, the next working day immediately after the holiday will be
considered as the date of maturity.

Journal entries when Bills of exchange is honored

1 When the drawer retains the bill with him till the date of its maturity and gets the same
collected directly

Transaction Books of Creditor/Drawer Books of Debtor/ Acceptor

Sale/Purchase of goods Debtor’s A/c Dr. Purchases A/c Dr