130 If the bank has charged some amount as collection charges, then the following entry will be recorded: Bank Dr. (with the amount of bill less collection charges) Collection/Bank Charges Account Dr. (with the amount of collection charges) To Bills sent for collection Account (Being amount of bill collected on maturity and bank charged collection charge) Drawee's Books: No entry is passed in the drawee's books for bill receivable sent to the bank for collection because drawee is not affected by this transaction. On the due date, the drawee will make the payment of the bill to the bank because the bill is in the possession of the bank. To pledge the bills receivables Sometimes drawer may pledge the bill receivable as security against a loan from a third party. In such a case, the drawer will not make any entry for pledging the bill receivable because right of the payment of the bill is not exercisable by the third party who has given a loan. Right of payment of the bill will be exercised by the third party only if the repayment of the loan is not made. Illustration: On 1 January, 2006, X sells goods to Y for Rs. 8,000 and draws four bills of exchange on him. The first for Rs.1,500 for one month, the second for Rs.1,000 for 2 months, the third for Rs.2.000 for 3 months and the fourth for Rs.3,500 for 4 months. Y accepts and returns these bills to X The second bill is discounted with the bank at 12% p.a. on 4th January, 2006 and on the same date the third bill is endorsed by X to his creditor Z. The fourth bill is sent to the bank for collection on 10th January, 2006. Pass journal entries in the book of X and Y assuming that all bills are met on their due dates