Bills Receivable Discounted but Not Due Till Date of Final Accounts

Bills receivable are written promises by a debtor to pay a certain amount at a specified date in the future. These bills can be discounted with a bank or a financial institution to receive the cash immediately instead of waiting for the maturity date. However, if the maturity date of the bill is after the date of the final accounts, the discounted bills receivable will be shown differently in the financial statements.

Treatment in the Balance Sheet

The discounted bills receivable that are not due till the date of the final accounts will be shown in the balance sheet in the following manner:

- Under the head of "Current Assets," the discounted bills receivable will be shown at their net realizable value, which is the amount received from the bank after deducting the discount and any other charges.
- The amount of the bill will also be shown separately as a footnote to the balance sheet.

Treatment in the Profit and Loss Account

The discounting of bills receivable is a financing activity and not an operating activity. Therefore, the discounting charges will not be shown in the profit and loss account as an expense. However, if any interest is payable on the bills, it will be shown as an expense in the profit and loss account.

Conclusion

In conclusion, bills receivable discounted but not due till the date of the final accounts will be shown differently in the financial statements. They will be shown at their net realizable value in the balance sheet, and any interest payable on the bills will be shown as an expense in the profit and loss account.