Journal Entry for Endorsement

When the seller sells goods on credit to other person in return of bills of exchange then the money of the seller is locked up until the maturity of the bill, however if the seller wants to use this bill of exchange then he or she can use it by endorsing this bill of exchange it to its own creditor. In simple words the seller transfers the bill of exchange to the creditor and this process of transferring is called endorsement.

In case of endorsement the seller will be endorser, and the person to whom the bill of exchange is transferred will be called endorsee. Hence when the bill of exchange matures it is the endorsee who will receive payment from the original creditor of the seller. Let’s look at the various journal entries which are passed in the books of both the parities.

Journal entries in the books of endorser

A) When bill is endorsed the following entry is passed

                                      Endorsee account Dr

                                              To Bills of exchange account

B) When bill matures there is no need for any entry in the books of endorser

C) However if the original creditor dishonors the bill then another entry is passed that is

                 Drawee account Dr

                      To Endorsee account

Hence in case of dishonor endorsee becomes creditor again and drawee becomes debtor of the company again.

Journal entries in the books of Endorsee

A) When bill is endorsed the following entry is passed

                               Bills receivable account Dr

                                  To Endorser account

B) When bill matures on maturity

                            Cash account Dr

                             To Bills receivable account

C) On Dishonor of bill

                             Endorser account Dr

                                 To Bills receivable account

0 comments… add one

Leave a Comment


Related pages


monopolistic competition advantages and disadvantagesaccounting horizontal analysisdisadvantage of factoringfactoring receivables definitionadvantages and disadvantages of commodity exchangeexamples of non diversifiable riskdebit card wikipedialimitations of jitdisadvantages and advantages of advertisementcomplementary goods economics definitionexamples of physical assetsdisadvantages of online bankingbenefits and drawbacks of capitalismadvantages disadvantages globalizationdisadvantages of commodity exchangedisadvantages of cashless societyfinancial market segmentationdifference between fund flow and cash flow statementdvr stockexample of capital reserveauthorized shares vs outstanding sharesstudent loan disadvantageswhat is a vertical mergercompare shopping portalsfactoring accounts receivable definitionconsumer nondurable goodsadvantages of hire purchase and leasingwhat is marginal costing in management accountingnormal and inferior goodscharacteristics of urbanisationdisadvantage of globalizationnormal good inferior goodmarket segmentation disadvantagesunbilled revenue accountingcash discount journal entryvertical analysis in accountingfull form of cpijain irrigation dvr share pricequota and tariffstate and explain the law of diminishing marginal utilitypreliminary expenses meaningdefine ficitiousjunk bonds meaningdifference between mixed economy and capitalismaccounting entry for prepaid expensesautocratic decisiondisadvantages of target marketingdiscounting of billdegree of operating leverage formulaexamples of semi durable goodsexamples of explicit costdisadvantages of marketing conceptmarket skimming definitionadvantages and disadvantages of living in rural and urban areasconglomerate merger companiesadvantages and disadvantages of central governmentcompare shopping portalsexplain traditional economydisadvantages of income statementdifference between systematic and unsystematic riskexplicit cost implicit costlimitation of barter systemwhat is current liabilities with exampleswhat are some of the advantages of a mixed economydisadvantages of marketing segmentationvertical merger exampleecs in bankingdefinition subventionthe accumulated depreciation account is calledvertical horizontal and conglomerate mergerswhat does current liabilities meandisadvantages of traditional bankingmarket skimming pricing examplemoil ipokinds of price elasticity of demanddistinguish between explicit and implicit costbhell companyconsumer taste and preferencesdifference between accounts receivable and accounts payablemarket skimming pricing strategy