Hello everyone, welcome again to another lecture.
Discounting of bills of exchange will be our main topic.
Today's main topic is Discounting of bills of exchange.
What happens, how it is, first we have to build up its base.
After understanding the base, we will be able to understand
its things further, so we take you to the writing pad.
There we will try to understand the base, after that we
will move things forward.
Let's move.
If you want, you can note it with you.
Discounting of bills of exchange.
Note it down.
This is a person whose name is Mr.
A. His name is Mr.
A and this is Mr.
B. Mr.
A sold Mr.
B goods.
A sold goods to Mr. B. I make it a little aside, otherwise
there will be a problem of spacing later.
Goods sold on 1st April 2023 worth Rs.
12,000. Goods sold for Rs.
12,000 and B is saying that
I am such an old friend of yours, I will give you money, I
need a little credit period.
A asked how much, he is saying 2 months.
He said, okay, I give you a credit period of 2 months, but
you give this thing in return, sign it and give it.
So A will make a letter, bills of exchange, he will write
in it, I sold goods worth Rs.
12,000 to B on 1st April, he made a promise of payment
after 2 months, hold this too, sign it and give it back.
B then signs it and returns it.
So now a letter has come to A, a bill of exchange. Sir,
when did this come? Sir, 1st April 2023.
How many months of date is put on it? 2 months later.
Can you tell me what will be the due date? If the due date
is said, when will the payment be made? Go ahead 2 months
from 1st April, 1st May, 1st June.
Right and 3 days of grace.
So this will be your 4th of June.
Okay, sir, there is no problem in it. 4th of June, 2
months, our due date came out, 4th of June, 4th of June,
2023.
Now friends, what happened? Mr.
A had just passed a month and today is the date, for
example, 1st of May, 2023.
Just a month has passed and there have been some losses in
Mr.
A's business.
There have been some losses due to which Mr. A is in real
need of funds. Mr. A needs money in a bad way.
He needs funds to survive.
What does Mr.
A do for this? Mr.
A calls B and says that it is 1st of May, I understand
this, there is some time left for 4th of June, but if
possible, can you pay me Rs.
12,000 now?
I have some urgent requirements in my business. So Mr. B
says that if I had money, I wouldn't have refused.
I don't have money. If I had money to pay on 1st of May, I
would have taken the due date of 1st of May.
If I had money on 4th of June, I would have been able to
pay on 4th of June.
That's why I don't have money to pay today. Poor Mr. B
refused. Mr. B refused.
He says that he doesn't have money to pay. Mr. A asked a
few more places.
He asked his friends and relatives. He asked his customers.
He is not able to arrange funds from anywhere.
So where will the person go in such a situation? Where will
the person go in such a situation?
Bank. Because who is the support of a loss? Bank.
You can put that on the story. He is also a support of a
loss.
But in our questions, the support of a loss is the bank.
Okay? Okay.
So Mr.
A goes to the bank and says to the bank,
Bank! Bank! My situation is like this.
I need urgent money.
No one is giving me support.
Can you help me?
The bank said to Mr.
We will help you, but we have not helped anyone so far,
until he has kept some loan with us in return.
What do you have to keep? What do you have to give as
security? What do you have that you will come to us for
help?
Mr. A said, I have a guarantee of Rs. 12,000, which I have
to take from Mr. B.
I have an asset of Rs. 12,000, whose name is Bill of
Exchange.
I am ready to keep that mortgage. I am ready to give that
to you.
Mr. A gives this bill receivable to the bank, which is of
Rs. 12,000.
But the bank is saying to Mr.
We will give you money, but the date on this bill is 4th
June, and today is 1st May, 2023.
This means that we will have to wait for 1 month and 3 days
to get money in return for this bill.
Even if you ignore the grace days, you will have to wait
for a month.
For this, the bank says, but Mr. A, we will give you money
today.
We will give you money today, we will pay you today, which
is your requirement.
And when will we get the money? After a month.
Because the bill that Mr. A has given to the bank, now the
bank will collect from Mr. B for Rs. 12,000.
What does this mean? Who will collect from Mr. B? The bank.
Who will be paid by Mr. B? The bank.
Now Mr. B will not give money to Mr. A.
So the bank is saying, we will give you money, no problem.
We will give it today, on 1st May, 2023.
And we will get the money after a month.
So we are a bank, we are not some Shirdi Sai Baba, that
today we have given you money, and then after a month, we
will get the same amount of money.
If any person helps, especially the bank, will he want
anything in return or not?
Yes, he will want something in return.
That's why the bank plays a trick.
The bank says, sir, we will give you Rs. 11,000.
How much asset did you give us? Rs. 12,000.
How much billable did Mr. A give to the bank? Rs. 12,000.
And how much is the bank paying Mr. A? Rs. 11,000.
Tomorrow, when Mr.
B will pay the bank, how much will Mr.
B pay the bank?
Rs. 12,000. Is it done? Yes.
So see, how much is left from the bank today? Rs. 11,000.
How much will come to the bank tomorrow? Rs. 12,000.
Don't you think the bank has Rs.
1,000 left?
Yes, sir. That's why the bank is doing this.
There is still time for the bill to be cleared.
Still, the bank gave money to Mr. A today.
The date of 4th June was delayed.
But on 1st May, Mr. A was paid by the bank.
Why? Because he gave Rs. 11,000.
And how much will the bank recover from Mr. B? Rs. 12,000.
The bank has saved Rs. 1,000.
Doesn't the bank say this to Mr.
Take Rs. 12,000 and tomorrow we will take back Rs. 12,000
from Mr. B.
Then what did the bank earn? Nothing.
Then the bank will be closed. The bank also has to earn
something.
Doesn't the bank say this to Mr.
Take Rs. 12,000 and tomorrow when Mr. B comes, we will take
back Rs. 12,000 from Mr. B.
And at that time, you give us the interest money separately.
Doesn't the bank say this?
It cuts it off right there.
How much will you give? Rs. 11,000.
How much will you receive? Rs. 12,000.
You can also understand it like this.
The bank made a payment of Rs. 11,000 and bought an asset
worth Rs. 12,000.
Right? What is a bill receivable asset?
You get money because of it.
The bank made a payment of Rs. 11,000 and bought an asset
worth Rs. 12,000.
From here, the bank saves Rs. 1,000.
You can also understand it like this.
We will give a name to this Rs. 1,000.
I will tell you in a while.
First, I will explain the name of this whole process to you.
This whole process is called the discounting of the bill.
What does discounting mean, sir?
You already know the meaning of the bill.
Bill receivable, bill of exchange.
Discounting means, the due date of that bill is 4th June,
2023.
Before that date, that is, on 1st May,
Going to the bank and getting the money, even if it is a
little less, is called the discounting of the bill. In the
local language, it is called getting the bill deducted.
In the local language, what is it called?
Getting the bill deducted.
You got the bill deducted.
Okay, sir.
Yes, you will have to deduct the money, no doubt.
But if you get Rs.
11,000 at the time of need, then that Rs.
11,000 is also a lot for you.
That's why Mr. A gets ready.
And this Rs.
1,000 that the bank deducts, this is called discounting
charges.
What is it called?
Discounting charges.
So this is the name of your concept, discounting of the
bill.
This is the name of your concept, discounting of bill of
exchange.
If we say in one line, Kajal, If we say in one line, what
does discounting mean?
What will it be?
In one line.
Before the due date, go to the bank and clear the bill in
less money.
It is called discounting of the bill.
If you remember in Hindi, it will be fine.
Before the due date, go to the bank, deduct some nominal
amount, and clear the bill.
It is called discounting of bill of exchange.
And the nominal amount deducted by the bank, what do we
call it?
Discounting of the bill.
Discounting charges
What do you call it?
Discounting charges
Okay, sir
Let's go to the notes
Let's read the notes once
General entries also have to be done
Because in this
Okay, I will get the general entries done here
Then we will go and read
First we make general entries
Here is A
Here is B
Sir, what will be the entry here at the time of sale?
What will be the entry here at the time of sale?
Tell me quickly
Turn on the fan
Tell me
Debtor account debit to sales
Who is the debtor?
B Means B account debit to sales account
B account debit to sales account
How much did you sell for? 12000 means 12000
This is the entry at the time of sale
What will happen after the sale?
He will make a bill and give it to B
And B will sign it and return it
So what will come to A?
Bill receivable
He will make the bill receivable account
Debit from 12000
And he will say to B
You go, son
I left you
He will leave B
He has made a debit
He will let him go by crediting
BR account debit to B account 12000 12000 What will happen
after that?
Where will B go?
Bank On which date is the first transaction?
On 1st April
When will the bill come?
On 1st April
B had to wait till 4th June
But A
Where does someone go on 1st May?
Bank goes
And the bill receivable
Which is kept in his hand
Of 12000
He gives it to the bank
Bill receivable goes to him
So what will we do?
We will credit
To bill receivable account 12000
We will credit it
Is it done?
Okay What will we get in return?
Will we get money, sir?
How much?
Full 12 or 11? 11000 How much will we get? 11000 And the
remaining 1000 which will be deducted
Is it a loss of A?
Yes or no?
Yes Debit all expenses and losses?
Yes What will we name the loss?
Discounting charges debit
Cash account debit
Discounting charges debit
To bill receivable 11, 1 and 12
I will tell you one more thing
The cash account debit you see here
Sometimes the bank instead of giving cash
Puts money in your account
That 11000 rupees
We have also made payment as proof
So what will be the debit instead of cash?
In such a case
Bank account debit will be done
Then the entry will be
Bank account debit
Discounting charges account debit
To bill receivable account 11000, 1000 and 12000
Okay? Okay Now what will happen?
Now which date will come? 4th June
4th June
B will make payment to whom?
Bank B will make payment to whom?
Bank So 4th June can be two things
Either B has made payment to the bank
So in that case there will be no entry in A
If B makes payment to the bank
Then any entry in A
Why? Now there is no connection of A
The transaction between B and the bank was completed
Okay sir
But If Mr.
A does not make payment on 4th June
If Mr.
A does not make payment on 4th June
Sorry Mr.
B does not make payment to the bank
Then what will be the situation in A?
Tell me
Okay Now As we have taught you so far
That the second entry
We will reverse it
B account debit to bill receivable
But He said okay
There will be a little change in this
We will catch B
We will debit B
We will do 12000
Because now we have to recover money from him
His bill is the one who was beaten
We will debit B
But see
Bill receivable is already
Debit and credit is over
Why are you adding books by crediting it again?
We had already given bill receivable to the bank
Do you know what will be the credit?
Bank account
Credit will be
Bank account
Why sir?
Bank will deduct money from our account
As soon as B will not make payment to the bank
Bank will deduct 12000 from each account
Sir, there is 12000 in each account
Does the bank not go overdraft?
His overdraft will go in the bank balance
Interest will start on it
And the bank will recover in its own way
However it is
But the bank will credit
Sorry, it will debit
It will deduct money from your account
Okay? You can also understand it like this
When the bill will be dishonored
Then A will hold his neck
B's neck
B account debit
He will say that you gave the bill and got beaten
He will catch him again
And who will hold A's neck?
Bank Who will hold A's neck?
Bank Entry will be B account debit to
Bank account 12000-12000
Okay? Okay sir
Very good
All this is written in the notes
You just have to listen and understand
And move ahead
That's it
Now just tell me this much
Entries are here at B
At the time of purchase
Whenever he will buy the goods
Tell the name of the creditor
A Purchase account debit to
Mr. A account
Purchase account debit to
Mr. A account
How much? 12000-12000 Purchase account debit to Mr.
A account 12000-12000
After that
He will give the bill payable
By signing
The bill is payable for him
So Mr.
A's liability will be over
It will be debit
Mr. A account
Debit How much? 12000 And what did he give by signing?
Bill payable
To bill payable
Account 12000
This entry is the same as we have read so far
After that, sir, you tell me
Will there be any entry here at B on May 1?
On May 1, A is going to the bank
He is getting the bill discounted
What is the entry of B?
The transaction that is happening on May 1
Between whom is it happening?
Between Mr.
A and the bank
So why did he start putting entry B?
B will not put anything
And on the 4th
Sorry On the 4th number
On June 4
When B will make the payment
If B makes the payment
So what will be the entry of the payment?
Do you know?
Bill payable
Account debit to
Bank account
12000 12000 And sir
If B does not make the payment
Tell me
So the entry of the second
Reverse it
There is no problem here at B
To reverse the second entry
He did not come with the step to get the discount
So in his case
If there is a dishonor
Then the second entry
Will reverse and go
His bill payable
It is cancelled
Debit it and finish it
And Mr.
A caught his neck again
So what does B have to do?
Mr. A has to make liability
In his books
Bill payable
Account debit to
Mr. A account 12000 12000 Okay Okay So let's see in the
notes
This is written
Or something else is written
Let's see the play of notes once more
Discounting of the bill
In the books of
Drawer, seller
Mr. A said
And in the books of
Drawer, buyer
Mr. B said
At the time of sale
Debtor account
Debit to sell
Then when the bill will be received
Then bill receivable
Account debit to debtor
And when the bill will be discounted
Going from the bank
Then bank account debit
Discounting charges
Account debit to bill receivable account
And if the bill is paid
On maturity
Then there will be no entry here
And if the bill is dishonored
Then he will catch debtor
And the bank will deduct money from his account
Debtor account
Debit to bank
So keep one thing in mind
In the case of dishonor
What will be the entry at the seller?
Debtor account
Debit to bank
When the discounting bill is dishonored
Then this entry will be at the seller
Debtor account
Debit to bank
What is written here?
Purchase to creditor
Creditor to BP
After that no entry in discounting
Because it is a transaction of A and bank
B is not involved
Then if the payment is done
Then BP to bank or cash
If not, then bill payable
Account debit to creditor
BP account
Debit to creditor
Okay?
Okay So this is our topic
Discounting of bills of exchange
In the coming clips
We will discuss more with you
Okay Thank you and bye bye for now