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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
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. 25 Illustration: On 1st 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
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