Insolvency of Acceptor of Bill Journal Entries

If the acceptor of bill of exchange will declare that he is insolvent at the time of maturity of bill, then bill will be dishonour and All the journal entries will pass which I have taught in dishonour of bill journal entries. Except this, we app some more journal entries. Because there is no hope of getting money from same drawee, so, All due fund will be bad debts for drawer.

Following are the Main Journal Entries when Acceptor will be Insolvent

In the books of Drawer

1st Journal Entry


Drawee Account Debit

Bill Receivable Account Credit

2nd journal Entry

If there is full loss of drawer's receivable money

Bad Debts Account Debit

Drawee Account Credit

If drawer will receive some money

Bank Account ( 20 % Received of total receivable amount ) Debit

Bad Debt Account ( 80% not received of total receivable amount ) Debit

Drawee Account Credit


In the books of Drawee

1st Journal Entry


Bill Payable Account Debit

Drawer Account Credit

2nd journal Entry

If there is full loss of drawer's receivable money

Drawer Account Debit

Deficiency Account Credit


If drawer will receive some money

Drawer Account Debit

Bank Account ( 20 % Received of total receivable amount ) Credit

Deficiency  Account ( 80% not received of total receivable amount ) Credit

( Logic :  When court accepted that drawee became insolvent. His reputation will become low in the market. But still, he is human being. So, as human being, he has free from his liability of his creditor. Drawer is his creditor. He has not ability to pay him full. Only 20% he will pay. So, in the books, for decreasing total liability of drawer, we need to debit the drawer account. Credit will be bank account, because we have paid it and our total asset will decrease with this amount and we have no rest asset. So, balance will deficiency account as credit of this journal entry. )

Related Contents 


  1. Renewal of Bill Journal Entries 
  2. Bill Dishonour Journal Entries 
  3. Bill Sent for Collection with Bank Journal Entries 
  4. Bill Discounting with Bank Journal Entries
  5. Journal Entries for Endorsement of Bill
  6. Journal Entries of Bill of Exchange
  7. Accounting of Bill of Exchange 

Reference

11th Class Accounting eBook

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Accounting Education: Insolvency of Acceptor of Bill Journal Entries
Insolvency of Acceptor of Bill Journal Entries
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