What is a Bill of Exchange? Why is it used?
Answer Posted / hannah
Hi,
Bills of exchange may be defined as a commitment subscribed
by your customer to pay a certain amount on a given date
upon presentation of the bill of exchange. They can be used
to materialize installment payments.
For example, you have accepted that your customer pays the
invoice amount in 3 monthly installments of 1000 USD each.
You will issue 3 bills of exhange of 1000 usd each and
maturing in month in month m, m+1 and m+2. The bills of
exchange will be sent to your customer for
acceptance(customer signs them).
Once accepted they will be returned to you. You will have to
post accounting entries. But note that even though the
accepted bills of exchange can be considered as payment, you
cannot clear the outstanding customer invoice until the
bills are effectively paid at maturity date. You then have
to post the bills of exchange as a special GL transaction.
Again once you have received the bills of exchange you may
decide to discount them right away with your bank and this
is done with or without recourse. Depending on the option
choosen, accounting entries are different. by discounting
the bills you receive payment of the bill and this can be
used to clear the outstanding customer invoice.
But note that until the bill is finally paid by the customer
at maturity date you remain liable. You account for this
liability by making postings which will show the discounted
bills of exchange as a contingent liability. They do not
show in the balance sheet itself but appear in an appendix
of the balance sheet.
Is This Answer Correct ? | 92 Yes | 14 No |
Post New Answer View All Answers
Could any one explain Process Flow and Integration of HR with FI.
What do you mean by operation scrap?
Difference between depreciation ,accumulated depreciation and apc?
What is the cash management? : fi- general ledger
How is it possible to apply 2 different overhead rates for 2 different finished goods?
What do you understand by cost center, profit center in controlling? : cost center accounting
Explain customer/vendor master records? : fi- accounts receivable
Can you tell me Product costing to CO-PA integration step by step ? Technical things ?
What is the legacy system migration workbench (lsmw) and when would you use it in your sap fi/co rollout?
What are the major components of chart of accounts ?
Explain reversal of documents in sap? : fi- general ledger
What is fast entry? : fi- general ledger accounting
Explain ‘financial accounting (fi)’ in sap.
What is account group? What does it control?
please any body can tell me ,what reponsibilities and roles should a sap fico consultant do in the job