Go Ad-Free on CAclubindia with Daily Mobile Updates. Subscribe Now!

nature of account

vikas ghuwalewala (owner) (86 Points)

27 April 2010

what is the nature of bills receivables and bills payable account ???

is it personal or real or why???

Reply
Follow
Share

13 Replies

(Guest)

Both B/R and B/P are personal A/cs… To be more apt, they are Representative Personal A/c

Why??

Both these accounts represent Debtors or creditors of a particular entity.

The rule followed to pass entry in such cases is:

Dr. the receiver of the benefit

Cr. The giver of the benefit.

In the above rule I have highlighted the inner meaning of rule. Suppose when B/R is issued, it’s Dr. because that B/R represents Debtor from whom money is receivable... In a way our entity has given those debtors a benefit i.e. credit so as per rule we Dr. B/R a/c( at the time of issue).

Similarly B/P which is issued against creditors and it represent the liability towards creditors... It’s credited because Creditors have given us the benefit i.e. credit. So we Cr. B/P A/c(at the time of issue)

To be more clear and to the point, Both B/R and B/P cannot be Real A/c… Real a/c applies to assets of an entity.. These B/R and B/P are not assets because they are not yet acquired as like Plant, building etc. They are yet to be encashed. Asset means which has been acquired and has some value.

Hence, Bills Receivable and Bills Payable are Representative Personal A/cs.

Hope you have understood. If not, ask again without hesitation.

7 Like

Upgrade to CAclubindia Pro. Subscribe Now!

CMA.Baskar.V (Cost Accountant) (400 Points)
Replied 27 April 2010

good reply by fazid.........

CA Himanshu Bansal (Risk Manager) (2345 Points)
Replied 27 April 2010

Originally posted by : Faiz Ahmed
	Both B/R and B/P are personal A/cs… To be more apt, they are Representative Personal A/c Why?? Both these accounts represent Debtors or creditors of a particular entity. The rule followed to pass entry in such cases is: Dr. the receiver of the benefit Cr. The giver of the benefit. In the above rule I have highlighted the inner meaning of rule. Suppose when B/R is issued, it’s Dr. because that B/R represents Debtor from whom money is receivable... In a way our entity has given those debtors a benefit i.e. credit so as per rule we Dr. B/R a/c( at the time of issue). Similarly B/P which is issued against creditors and it represent the liability towards creditors... It’s credited because Creditors have given us the benefit i.e. credit. So we Cr. B/P A/c(at the time of issue) To be more clear and to the point, Both B/R and B/P cannot be Real A/c… Real a/c applies to assets of an entity.. These B/R and B/P are not assets because they are not yet acquired as like Plant, building etc. They are yet to be encashed. Asset means which has been acquired and has some value. Hence, Bills Receivable and Bills Payable are Representative Personal A/cs. Hope you have understood. If not, ask again without hesitation.

Really good explanation Faiz.. :)

1 Like

Santhosh Poojary (SIEMPRE AHÍ PARA TI) (15607 Points)
Replied 28 April 2010

HaY...Great Explanation by Faiz...keep it up dude..............

vikash rathi (Chartered Accountant) (787 Points)
Replied 28 April 2010

Originally posted by : Faiz Ahmed
	Both B/R and B/P are personal A/cs… To be more apt, they are Representative Personal A/c Why?? Both these accounts represent Debtors or creditors of a particular entity. The rule followed to pass entry in such cases is: Dr. the receiver of the benefit Cr. The giver of the benefit. In the above rule I have highlighted the inner meaning of rule. Suppose when B/R is issued, it’s Dr. because that B/R represents Debtor from whom money is receivable... In a way our entity has given those debtors a benefit i.e. credit so as per rule we Dr. B/R a/c( at the time of issue). Similarly B/P which is issued against creditors and it represent the liability towards creditors... It’s credited because Creditors have given us the benefit i.e. credit. So we Cr. B/P A/c(at the time of issue) To be more clear and to the point, Both B/R and B/P cannot be Real A/c… Real a/c applies to assets of an entity.. These B/R and B/P are not assets because they are not yet acquired as like Plant, building etc. They are yet to be encashed. Asset means which has been acquired and has some value. Hence, Bills Receivable and Bills Payable are Representative Personal A/cs. Hope you have understood. If not, ask again without hesitation.

agree with it ....really good reply.......

Upgrade to CAclubindia Pro. Subscribe Now!

Vikas Gupta (CHARTERED ACCOUNTANT) (16295 Points)
Replied 28 April 2010

Originally posted by : SAN...
	HaY...Great Explanation by Faiz...keep it up dude..............

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 28 April 2010

Originally posted by : Faiz Ahmed
	Both B/R and B/P are personal A/cs… To be more apt, they are Representative Personal A/c Why?? Both these accounts represent Debtors or creditors of a particular entity. The rule followed to pass entry in such cases is: Dr. the receiver of the benefit Cr. The giver of the benefit. In the above rule I have highlighted the inner meaning of rule. Suppose when B/R is issued, it’s Dr. because that B/R represents Debtor from whom money is receivable... In a way our entity has given those debtors a benefit i.e. credit so as per rule we Dr. B/R a/c( at the time of issue). Similarly B/P which is issued against creditors and it represent the liability towards creditors... It’s credited because Creditors have given us the benefit i.e. credit. So we Cr. B/P A/c(at the time of issue) To be more clear and to the point, Both B/R and B/P cannot be Real A/c… Real a/c applies to assets of an entity.. These B/R and B/P are not assets because they are not yet acquired as like Plant, building etc. They are yet to be encashed. Asset means which has been acquired and has some value. Hence, Bills Receivable and Bills Payable are Representative Personal A/cs. Hope you have understood. If not, ask again without hesitation.

beautiful explanation

Renuka (CA FINAL) (317 Points)
Replied 28 April 2010

Originally posted by : Faiz Ahmed
	Both B/R and B/P are personal A/cs… To be more apt, they are Representative Personal A/c Why?? Both these accounts represent Debtors or creditors of a particular entity. The rule followed to pass entry in such cases is: Dr. the receiver of the benefit Cr. The giver of the benefit. In the above rule I have highlighted the inner meaning of rule. Suppose when B/R is issued, it’s Dr. because that B/R represents Debtor from whom money is receivable... In a way our entity has given those debtors a benefit i.e. credit so as per rule we Dr. B/R a/c( at the time of issue). Similarly B/P which is issued against creditors and it represent the liability towards creditors... It’s credited because Creditors have given us the benefit i.e. credit. So we Cr. B/P A/c(at the time of issue) To be more clear and to the point, Both B/R and B/P cannot be Real A/c… Real a/c applies to assets of an entity.. These B/R and B/P are not assets because they are not yet acquired as like Plant, building etc. They are yet to be encashed. Asset means which has been acquired and has some value. Hence, Bills Receivable and Bills Payable are Representative Personal A/cs. Hope you have understood. If not, ask again without hesitation.

Nice explanation friend

praveen (Chartered Accountant) (6971 Points)
Replied 28 April 2010

Wonderful explantion

I am seeing such a post from long time

VUELVE (CA- Student) (351 Points)
Replied 29 April 2010

Superb Explanation...!!! Thank you...!!

Upgrade to CAclubindia Pro. Subscribe Now!

vijay (lecturer) (22 Points)
Replied 15 January 2018

Bills of exchange is real account as per Indian negotiable instruments act it is negotiable instruments that can be endorse and we treat as current asset. It is current asset after acceptance from acceptor.