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


prepayment journal entryforeign exchange rate quotationsnostro accountscreditors journal entrydisadvantages of marketing segmentationformula for working capital turnover ratiofactors that affect elasticity of demandmix of capitalism and socialismadvantages of barter systemmeaning of capital rationingconglomerate corporationfdi disadvantageswhat is perpetual successionwhat is the difference between accounts payable and accounts receivablebackward integration examplesicici bank founder nameadvantages and disadvantages of communismautocratic decisionscarcity examples in economicsjournal entry for prepaid insurancewhat are durable and nondurable goodscharacteristics oligopolymeaning of discounting of billsadvantages and disadvantages of developing countriesmeaning of capital formationwhat is conglomerate in economicsadvantages of debenturemerits of privatizationbenefits of penetration pricingadvantages of mixed economydistinguish between capitalism and socialismwhat is an autocratic leadership styleadvantages and disadvantages of delegationmeaning of explicit costoperating lease finance lease differenceforeign exchange reserves of india meaningadvantages and disadvantages of oligopolyexplicit cost examplepaid salaries to employees journal entrypositives of urbanizationwhat is profitability ratioconsignor consigneewhat is consignor and consigneecapm explainedexplain privatisationperfect or pure competitionadvantages of unrelated diversificationmerits and demerits of bankingdirect and indirect quote in forexdisadvantages of command economyadvantages capitalismdemat account benefitsfactoring receivables definitionwhat is msf ratemeaning of cost push inflationfdi and fii meaningdisadvantages of hire purchasefloating exchange ratesexample of law of diminishing returnsdefinition compensatingtariff vs quotadifference between joint venture and partnershipwhat are vertical mergersadvantages and disadvantages of global warmingexample of unqualified audit reportmeaning of cash discountfeatures of monopolistic competition pptdifference between an operating lease and a finance leaseadvantages and disadvantages of decentralisationbarter system meansrental income journal entrydeflation refers to a situation wherefifo method in cost accountingwhat is capm modelcomplementary goodsadvantages of debit cards