Bill Sent for Collection: Journal Entries and Common Confusion

Bill sent for collection is one of those Accountancy topics where the entry is short, but the confusion is big.

Students often ask:

• Has the bank bought the bill?
• Did the drawer receive money immediately?
• Why do we debit Bills Sent for Collection Account?
• Why is there no entry in the drawee’s books when the bill is sent to the bank?
• What changes if the bill is dishonoured?

The good news is that this topic becomes very easy once you understand one simple idea.

That one line separates this topic from discounting of bill, and it also explains almost every journal entry.

First, Recall the Basic Bill Story

Most bill of exchange questions begin with a credit sale.

Suppose A sells goods to B for Rs. 20,000 on credit. A is the seller and creditor. B is the buyer and debtor. A draws a bill on B, and B accepts it.

After acceptance:

Person	Meaning	Account used
A, the drawer	Will receive money on maturity	Bills Receivable A/c
B, the drawee or acceptor	Has to pay money on maturity	Bills Payable A/c

So in A’s books, the accepted bill is an asset. In B’s books, the same accepted bill is a liability.

Before we discuss collection, remember the base entries.

In the Books of A, the Drawer

Particulars	Debit	Credit
B’s A/c Dr.	Rs. 20,000
To Sales A/c		Rs. 20,000
Bills Receivable A/c Dr.	Rs. 20,000
To B’s A/c		Rs. 20,000

The first entry records the credit sale. The second entry replaces B’s personal account with Bills Receivable because A has received B’s accepted bill.

In the Books of B, the Drawee

Particulars	Debit	Credit
Purchases A/c Dr.	Rs. 20,000
To A’s A/c		Rs. 20,000
A’s A/c Dr.	Rs. 20,000
To Bills Payable A/c		Rs. 20,000

The second entry replaces A’s personal account with Bills Payable because B has accepted a formal payment responsibility.

What Does Bill Sent for Collection Mean?

Bill sent for collection means the drawer sends the accepted bill to the bank so that the bank can present it to the drawee on maturity and collect the money.

The bank is helping with custody and collection. It is not purchasing the bill from the drawer.

Think of the bank as a messenger with responsibility:

1. The drawer gives the accepted bill to the bank.
2. The bank keeps the bill safely.
3. On maturity, the bank presents the bill to the drawee.
4. If the drawee pays, the bank credits the drawer’s account.
5. If the drawee does not pay, the bank informs the drawer and may pay noting charges.

That is the whole story.

This is the biggest difference between the two.

Why Does the Drawer Send a Bill for Collection?

A drawer may hold many bills receivable at the same time. Each bill has its own maturity date, amount, acceptor, and place of payment. If the drawer keeps all bills personally, there is a risk of missing the date or not presenting the bill properly.

Sending the bill to the bank makes the process easier.

The bank can:

• keep the bill safely
• present it on the correct maturity date
• collect the amount from the drawee
• credit the drawer’s account after collection
• inform the drawer if the bill is dishonoured

The drawer does not receive cash when the bill is sent. The drawer receives cash only when the bill is collected on maturity.

The Account Used: Bills Sent for Collection Account

When the drawer sends the bill to the bank for collection, Bills Receivable Account is credited.

Why?

Because the bill is no longer physically with the drawer. It has been handed to the bank for collection.

At the same time, Bills Sent for Collection Account is debited.

Why?

Because the drawer still has a claim over the amount. The bill has not been sold or cancelled. It is simply being tracked separately until the bank reports the result.

The entry is:

Bills Sent for Collection A/c Dr.
    To Bills Receivable A/c

This does not mean cash has been received. It only means the bill has moved from the drawer’s hands to the bank for collection.

Entry When the Bill Is Sent to the Bank for Collection

Suppose A has B’s accepted bill for Rs. 20,000. A sends the bill to the bank for collection.

In A’s books:

Particulars	Debit	Credit
Bills Sent for Collection A/c Dr.	Rs. 20,000
To Bills Receivable A/c		Rs. 20,000

There is no entry in B’s books at this stage.

Why?

Because B’s liability has not changed. B had to pay the bill on maturity before it was sent to the bank. B still has to pay the bill on maturity after it is sent to the bank.

For B, the bill is still Bills Payable.

Sending the bill for collection does not change B’s liability, so B passes no entry.

Entry When the Bill Is Collected by the Bank

Now suppose the bill is honoured on maturity. The bank collects Rs. 20,000 from B and credits A’s bank account.

In A’s books:

Particulars	Debit	Credit
Bank A/c Dr.	Rs. 20,000
To Bills Sent for Collection A/c		Rs. 20,000

This closes Bills Sent for Collection Account.

In B’s books:

Particulars	Debit	Credit
Bills Payable A/c Dr.	Rs. 20,000
To Bank A/c		Rs. 20,000

B has paid the bill, so Bills Payable is closed.

What If the Bank Deducts Collection Charges?

Sometimes the bank collects the bill amount but deducts collection charges before crediting the drawer’s bank account.

Suppose the bill amount is Rs. 20,000 and the bank deducts Rs. 200 as collection charges. A receives only Rs. 19,800 in the bank account.

In A’s books:

Particulars	Debit	Credit
Bank A/c Dr.	Rs. 19,800
Bank Charges A/c Dr.	Rs. 200
To Bills Sent for Collection A/c		Rs. 20,000

Why debit Bank Charges?

Because it is an expense for A. The bank provided a collection service and charged Rs. 200 for it.

In B’s books, the entry remains:

Particulars	Debit	Credit
Bills Payable A/c Dr.	Rs. 20,000
To Bank A/c		Rs. 20,000

B pays the full bill amount. The collection charge is between A and A’s bank.

Do not add bank collection charges to the drawee’s account. They are not the same as noting charges on dishonour.

Collection Charges vs Noting Charges

This is a very common confusion.

Point	Collection charges	Noting charges
When they arise	When bank collects the bill as a service	When bill is dishonoured and noted
Who charges them	Bank	Notary public, often paid through bank or holder
Normal burden	Drawer, unless stated otherwise	Drawee, because drawee caused dishonour
Entry in drawer’s books	Bank Charges A/c Dr.	Drawee’s A/c Dr.
Situation	Bill is honoured	Bill is dishonoured

Collection charges are a service cost.

Noting charges are connected with dishonour.

Do not mix them.

Bill Sent for Collection vs Discounting of Bill

Students often confuse these two because both involve the bank. But the role of the bank is completely different.

Point	Sent for collection	Discounted with bank
Does the drawer receive money immediately?	No	Yes
Does the bank deduct discount for early payment?	No	Yes
Who owns the bill after the event?	Drawer remains the real owner	Bank becomes holder after discounting
Why is the bill given to the bank?	For safe custody and collection	To get cash before maturity
Entry when given to bank	Bills Sent for Collection A/c Dr. to Bills Receivable A/c	Bank A/c Dr., Discount A/c Dr. to Bills Receivable A/c
Entry on successful maturity in drawer’s books	Bank A/c Dr. to Bills Sent for Collection A/c	No entry

The last row is especially important.

When a discounted bill is honoured, the drawer passes no entry at maturity because the drawer already received money earlier.

When a bill sent for collection is honoured, the drawer must pass an entry at maturity because the drawer receives money only then.

Full Solved Example: Bill Honoured

Let us solve a complete question.

On Jan. 1, A sold goods to B for Rs. 30,000 on credit. On the same date, A drew a bill on B for three months. B accepted the bill and returned it to A. On Mar. 20, A sent the bill to the bank for collection. On maturity, B honoured the bill and the bank deducted Rs. 300 as collection charges.

Pass journal entries in the books of A and B.

Books of A, the Drawer

Date	Particulars	Debit	Credit
Jan. 1	B’s A/c Dr.	Rs. 30,000
	To Sales A/c		Rs. 30,000
Jan. 1	Bills Receivable A/c Dr.	Rs. 30,000
	To B’s A/c		Rs. 30,000
Mar. 20	Bills Sent for Collection A/c Dr.	Rs. 30,000
	To Bills Receivable A/c		Rs. 30,000
On maturity	Bank A/c Dr.	Rs. 29,700
	Bank Charges A/c Dr.	Rs. 300
	To Bills Sent for Collection A/c		Rs. 30,000

Books of B, the Drawee

Date	Particulars	Debit	Credit
Jan. 1	Purchases A/c Dr.	Rs. 30,000
	To A’s A/c		Rs. 30,000
Jan. 1	A’s A/c Dr.	Rs. 30,000
	To Bills Payable A/c		Rs. 30,000
On maturity	Bills Payable A/c Dr.	Rs. 30,000
	To Bank A/c		Rs. 30,000

Notice two things carefully.

First, B has no entry on Mar. 20 because the bill being sent to the bank does not change B’s liability.

Second, the bank charges appear only in A’s books because A used the bank’s collection service.

What Happens If the Bill Is Dishonoured?

Now suppose the bank presents the bill on maturity, but B does not pay.

The bill has failed. Bills Sent for Collection Account must be closed, and B must again become debtor in A’s books.

If there are no noting charges, the entry in A’s books is:

B's A/c Dr.
    To Bills Sent for Collection A/c

If the bank pays noting charges, those charges are also added to B’s account because B caused the dishonour.

Suppose the bill amount is Rs. 30,000 and the bank pays Rs. 200 as noting charges.

In A’s books:

Particulars	Debit	Credit
B’s A/c Dr.	Rs. 30,200
To Bills Sent for Collection A/c		Rs. 30,000
To Bank A/c		Rs. 200

In B’s books:

Particulars	Debit	Credit
Bills Payable A/c Dr.	Rs. 30,000
Noting Charges A/c Dr.	Rs. 200
To A’s A/c		Rs. 30,200

After dishonour, A again shows B as debtor. B again shows A as creditor. The bill account is no longer the centre of the transaction because the bill did not bring payment.

Full Solved Example: Bill Dishonoured

On Apr. 1, Rohan sold goods to Kabir for Rs. 18,000 and drew a three-month bill on him. Kabir accepted the bill. On Jun. 25, Rohan sent the bill to the bank for collection. On maturity, the bill was dishonoured and the bank paid Rs. 150 as noting charges.

Pass journal entries in the books of Rohan and Kabir.

Books of Rohan, the Drawer

Date	Particulars	Debit	Credit
Apr. 1	Kabir’s A/c Dr.	Rs. 18,000
	To Sales A/c		Rs. 18,000
Apr. 1	Bills Receivable A/c Dr.	Rs. 18,000
	To Kabir’s A/c		Rs. 18,000
Jun. 25	Bills Sent for Collection A/c Dr.	Rs. 18,000
	To Bills Receivable A/c		Rs. 18,000
On maturity	Kabir’s A/c Dr.	Rs. 18,150
	To Bills Sent for Collection A/c		Rs. 18,000
	To Bank A/c		Rs. 150

Books of Kabir, the Drawee

Date	Particulars	Debit	Credit
Apr. 1	Purchases A/c Dr.	Rs. 18,000
	To Rohan’s A/c		Rs. 18,000
Apr. 1	Rohan’s A/c Dr.	Rs. 18,000
	To Bills Payable A/c		Rs. 18,000
On maturity	Bills Payable A/c Dr.	Rs. 18,000
	Noting Charges A/c Dr.	Rs. 150
	To Rohan’s A/c		Rs. 18,150

The wording “bank paid noting charges” can look as if the bank has suffered the expense. But in the final accounting logic, the drawee bears the noting charges.

How to Read the Question Without Panic

When you see a bill sent for collection question, read it in this order.

1. Who sold goods to whom?
2. Who drew the bill?
3. Who accepted the bill?
4. Was the bill sent to bank for collection?
5. Was the bill honoured or dishonoured?
6. Did the bank deduct collection charges?
7. Were noting charges paid on dishonour?

This order keeps the story clean.

Do not start from the final event. Start from the original credit sale, then move to the bill, then collection, then maturity.

A Quick Entry Map

Use this only after you understand the logic.

In the Books of Drawer

Event	Entry
Credit sale	Drawee’s A/c Dr. to Sales A/c
Bill accepted	Bills Receivable A/c Dr. to Drawee’s A/c
Sent to bank for collection	Bills Sent for Collection A/c Dr. to Bills Receivable A/c
Collected by bank	Bank A/c Dr. to Bills Sent for Collection A/c
Collected with bank charges	Bank A/c Dr., Bank Charges A/c Dr. to Bills Sent for Collection A/c
Dishonoured, no noting charges	Drawee’s A/c Dr. to Bills Sent for Collection A/c
Dishonoured, bank pays noting charges	Drawee’s A/c Dr. to Bills Sent for Collection A/c and Bank A/c

In the Books of Drawee

Event	Entry
Credit purchase	Purchases A/c Dr. to Drawer’s A/c
Bill accepted	Drawer’s A/c Dr. to Bills Payable A/c
Drawer sends bill for collection	No entry
Bill honoured	Bills Payable A/c Dr. to Bank A/c
Bill dishonoured with noting charges	Bills Payable A/c Dr., Noting Charges A/c Dr. to Drawer’s A/c

Common Mistakes Students Make

Mistake 1: Treating Collection Like Discounting

This is the biggest error.

In discounting, the drawer receives money before maturity. In collection, the drawer does not.

So do not write:

Bank A/c Dr.
Discount A/c Dr.
    To Bills Receivable A/c

That is a discounting entry, not a collection entry.

For collection, write:

Bills Sent for Collection A/c Dr.
    To Bills Receivable A/c

Mistake 2: Passing an Entry in Drawee’s Books When the Bill Is Sent

If A sends B’s accepted bill to the bank for collection, B does not pass an entry on that date.

B’s responsibility is still the same: pay the bill on maturity.

Mistake 3: Crediting Bank When the Bill Is Sent

Do not credit Bank Account when the bill is merely sent for collection.

The bank has not paid anything to the drawer yet. It has only received the bill for collection.

Mistake 4: Forgetting to Close Bills Sent for Collection Account

Bills Sent for Collection Account must close when the bank reports the result.

If the bill is honoured, credit Bills Sent for Collection Account against Bank and possible Bank Charges.

If the bill is dishonoured, credit Bills Sent for Collection Account against the drawee’s personal account.

Mistake 5: Treating Noting Charges Like Collection Charges

Collection charges are usually the drawer’s expense.

Noting charges are ultimately the drawee’s expense because the drawee failed to honour the bill.

This difference matters in entries.

A Simple Memory Trick

Remember the word “collection” as “carry and collect.”

The bank carries the bill safely until maturity and collects money on behalf of the drawer.

The bank is not buying the bill. The bank is not paying early. The bank is only helping the drawer collect.

So the entry on sending the bill is not about cash. It is about shifting the bill from one account to another:

Bills Receivable -> Bills Sent for Collection

Later, when the bank collects:

Bills Sent for Collection -> Bank

If the bill fails:

Bills Sent for Collection -> Drawee's personal account

That is the whole flow.

Final Takeaway

Bill sent for collection becomes easy when you stop seeing the bank as a buyer of the bill.

The drawer still waits until maturity. The bank simply keeps the bill, presents it, and reports the result. If the drawee pays, the drawer’s bank account is credited. If the drawee dishonours the bill, the drawee again becomes debtor in the drawer’s books.

Keep these three lines in mind:

Sent for collection: Bills Sent for Collection A/c Dr. to Bills Receivable A/c
Honoured: Bank A/c Dr. to Bills Sent for Collection A/c
Dishonoured: Drawee's A/c Dr. to Bills Sent for Collection A/c

If the question adds bank collection charges, debit Bank Charges. If it adds noting charges on dishonour, add them to the drawee’s account.

Frequently Asked Questions

1. What is bill sent for collection?

Bill sent for collection means the drawer sends an accepted bill to the bank so that the bank can collect the amount from the drawee on maturity. The bank acts as a collecting agent.

2. What is the journal entry when a bill is sent for collection?

In the drawer’s books, the entry is Bills Sent for Collection A/c Dr. to Bills Receivable A/c. This shows that the bill has been handed to the bank for collection.

3. Does the drawer receive money immediately when the bill is sent for collection?

No. The drawer receives money only when the bank collects the bill amount on maturity. If the drawer receives money immediately before maturity, the case is discounting, not collection.

4. Is there any entry in the drawee’s books when the bill is sent for collection?

No. The drawee passes no entry when the drawer sends the bill to the bank for collection because the drawee’s liability has not changed.

5. What is the entry when the bill sent for collection is honoured?

In the drawer’s books, the entry is Bank A/c Dr. to Bills Sent for Collection A/c. In the drawee’s books, the entry is Bills Payable A/c Dr. to Bank A/c.

6. What if the bank deducts collection charges?

In the drawer’s books, debit Bank Account with the net amount received and debit Bank Charges Account with the charges. Then credit Bills Sent for Collection Account with the full bill amount.

7. What is the entry if a bill sent for collection is dishonoured?

In the drawer’s books, debit the drawee’s personal account and credit Bills Sent for Collection Account. If the bank paid noting charges, also credit Bank Account and add the noting charges to the drawee’s debit.

8. Who bears noting charges when a bill sent for collection is dishonoured?

The drawee bears noting charges because the drawee caused the dishonour. Even if the bank or drawer pays them first, the amount is recovered from the drawee.

9. What is the difference between collection charges and noting charges?

Collection charges are bank service charges for collecting an honoured bill, usually borne by the drawer. Noting charges arise when a bill is dishonoured and are ultimately borne by the drawee.

10. Why is Bills Sent for Collection Account debited?

It is debited because the drawer still has a claim on the bill amount, but the bill is now with the bank for collection. It is a temporary account used until the bill is collected or dishonoured.