ABSTRACT
This chapter helps the reader to comprehend the accounting treatments relating to the issuance, acceptance, discounting, maturity and endorsement of bills of exchange and promissory notes in the accounts of both the drawer and drawee. It illustrates the accounting technique related to the accommodation bills and the special treatment needed in case of insolvency, as well as early retirement of a bill of exchange and promissory note. Basically, bills of exchange are financial documents that require the individual or business that is addressed in the document to pay a specified amount of money on a date that is cited within the text of the document. Bills of exchange and promissory notes share some common advantages. The operation of bills of exchange depends on the circumstances of the parties involved and whether the bill is being traded. The chapter provides a logical link between the accounting approach for financial instruments and financial risk management.
