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Honour of a Bill – The Happy Ending! ✅

Definition: When the Drawee pays the amount of the bill on the Date of Maturity, the bill is said to be Honoured.

Calculation of Due Date:

  • Term: Usually 3 months.
  • Grace Days: Always add 3 Days of Grace.
  • Example: Bill drawn on 1st Jan for 3 months.
    • 3 Months = 1st April.
    • +3 Days Grace = 4th April (Due Date).

4 Cases of Holding the Bill 💼

The Drawer (Raj) has 4 options with the bill before due date:

  1. Retain: Keep it in his pocket till due date.
  2. Discount: Sell it to the Bank for immediate cash (Bank charges interest).
  3. Endorse: Give it to his creditor (e.g., Raj owes money to Amit, so he gives Simran's bill to Amit).
  4. Send for Collection: Give it to the Bank just for safe-keeping and collection.

Journal Entry for Honour (In Drawer's Books):

  • Case 1 (Retained): Cash Dr. | To B/R
  • Case 2 (Discounted): No Entry (Bank gets the money from Drawee).
  • Case 3 (Endorsed): No Entry (Endorsee gets the money).
  • Case 4 (Collection): Bank Dr. | To Bill Sent for Collection.
Public Holiday Rule

If the Due Date falls on a Public Holiday (e.g., 26th Jan, Sunday), the due date is the Preceding Working Day (25th Jan). If it is an Emergency Holiday (Sudden strike), it is the Next Working Day.

Quiz Time! 🎯

Test Your Knowledge

Question 1 of 5

1. How many days of grace are added to calculate maturity date?

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💡 Final Wisdom: "3 Days of Grace is a tradition from old English law. Even if you are late, the law gives you 3 days to arrange the cash!" ⏳

Next up: Dishonour of a Bill - When things go wrong! ❌

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