Accounting for Bill

Bangna Commercial College

Accounting
for Bill

Mini English Program

MEP

Name………………………………………………….

NickName…………………………………………..

NO Class..................................... ………………………

22 Soi.Bangna – Trad 1, Bangna-Trad Rd. Bangna Distric, BKK

Chapter 1
Bills or Notes

Contents

1. Definition of Bills or Notes
2. Benefits and Restrictions of Using Notes and Cheque
3. Ethics of Notes Issuer
4. Types of Notes
5. Calculating the Maturity Date of Notes
6. Calculating Interest of Notes

Learning Objectives

1. To be able to define and explain the meaning of Notes
2. To be able to identify types of Notes
3. To be able to calculate the due date of Notes
4. To be able to calculate interest of Notes

Accounting for Bill BUNYAWEE SUWANNABOOL

Chapter 1

Bills or Notes

Definition of Notes

In accountant ‚Notes‛ means a document or an evidence of debt between debtor and creditor that
has more credibility than accounts receivable.

In business, there are a lot of goods or assets trading in both cash and credit. If the trading amount
is not much and the payment term is short, buyer will record in accounts payable; while seller will do on
accounts receivable. If the trading amount is huge and the payment term is long, for seller to have
confidence on receiving payment, note is used for payment. Notes is a better payment guarantee than
accounts receivable that buyer records in notes payable account; while seller records in notes receivable
account.

Benefits and Restrictions of Using Notes and Cheque

When trading goods in large amount, seller prefers collection with note rather than accounts
receivable because

1. For the confidence of receiving right amount of payment on time, business with large trading
amount and high value, seller prefers collection with note as it is an evidence document with
clearly stated details on amount of money and payment period that guarantees the face value
will be received on the maturity date. If buyer refuses to pay, legal proceeding can be done
once reaching the maturity date.

2. If the business received a note from selling product and services, when the business needs
money before the maturity date; it can sell a note discounted to the banks or financial
institutions or endorse the note and pay the creditor.

3. If it is interest-bearing note; when the payment is due, not only collection on the face value,
but also interest will be received. Interest can be another source of the business’s income.

Accounting for Bill BUNYAWEE SUWANNABOOL

Ethics of Notes Issuer

When using note, issuer should have ethics which are;
1. Punctuality – Notes issuer must be punctual on payment when it reaches the maturity date. If

the issuer cannot keep time, the business will lose its credibility and it will also affect the
future business operation.
2. Honesty – Notes issuer must be honest on payment to be exactly as on the Note’s face value.
The creditor must not edit or increase the face value to exploit the note issuer as it can lead to
the legal proceeding that will destroy the business’s reputation.

Types of Notes

Under the Civil and Commercial Code Section 898, categorized notes into 3 types
1. Bill of Exchange
2. Promissory Note
3. Cheque

1. Bill of Exchange

According to the Civil and Commercial Code Section 908, it is stated that ‘A bill of
exchange is a written instrument by which a person, called the drawer, orders another person, called the
drawee, to pay a sum of money to, or to the order of, a person, called the payee.

To issue a bill of exchange following CCC Section 909, a bill of exchange must contain the
following particulars;

1. The name of it as a bill of exchange.
2. A conditional order to pay a sum certain in money.
3. The business name of the drawer.(payer)
4. A day of maturity.
5. The place of payment.
6. The business name of the payee, or a mention that it is payable to bearer.
7. The date and place where the note is issued.
8. The signature of the drawer.

Accounting for Bill BUNYAWEE SUWANNABOOL

Bill of exchange will be a complete document when the drawer (creditor) issues and sends to
drawee (debtor) for approval. For approval of a bill of exchange, the drawee must write ‘Approve for
money’ or ‘Approved’ and sign the name and date in the front side of note.

Bill of exchange can be a contract involving 2 or 3 parties:

1. Involving 2 parties –The drawer (creditor) and drawee (debtor) are approvers and the same

person.
Example of bill of exchange involving 2 parties

Bill of exchange No. 011

38 Soi Ramintha 13, Ranintra Rd,
Anusawari Sub district, Bangkhen District, Bangkok

1 March 25x1

To Miss Somrudee Jiradol

When reaching 30 days after the issued date, you must pay 50,000 Baht (fifty thousand Baht) to

me from your location.
Bunyawee Suwannabool
Mrs. Bunyawee Suwannabool

Certify to pay as condition aboved

Somrudee Jiradol

Somrudee Jiradol

3 March 25x1

2. Involving 3 parties which are

2.1 The Drawer (issuer or creditor)
2.2 The approver (Payer or debtor)
2.3 The Payee

Accounting for Bill BUNYAWEE SUWANNABOOL

Example of bill of exchange involving 3 parties No. 011

Bill of exchange

38 Soi Ramintha 13, Ranintra Rd,
Anusawari Sub district, Bangkhen District, Bangkok

1 March 25x1

To Miss Somrudee Jiradol

When reaching 30 days after the issued date, you must pay 50,000 Baht (fifty thousand Baht) to

Miss Sarothon Ochakul from your location.
Bunyawee Suwannabool
Miss Bunyawee Suwannabool

Certify to pay as condition aboved
Somrudee Jiradol
Somrudee Jiradol

3 March 25x1

Bill of exchange divided in 2 types which are;

1. Domestic bill of exchange - the drawer, drawee and payee are in the same country.

2. Foreign bill of exchange - the drawer, drawee and payee are in the different country.

2. Promissory Note

According to the Civil and Commercial Code Section 982, it is stated that ‘A promissory note is a
written instrument by which a person, called the maker, promises to pay a sum of money to, or to the
order of, another person, call the payee’

CCC Section 983 stated that a promissory note must contain the following particulars;
1. The designation of it as a promissory note.
2. An unconditional promise to pay a sum certain in money.
3. A day of maturity.
4. The place of payment.
5. The name or trade name of the payee.
6. The date and place where the promissory note is made.
7. The signature of the maker.

Accounting for Bill BUNYAWEE SUWANNABOOL

Example of promissory note

Promissory Note No. 013

38 Soi Ramintha 13, Ranintra Rd,
Anusawari Sub district, Bangkhen District, Bangkok

1 March 25x1
It has been forty-five days since I certified to pay 50,000 Baht (fifty thousand Baht) to
Miss Bunyawee Suwannabool with an interest rate of 9% per annum at Krungthai Bank, Ramintra branch.

Somrudee Jiradol
Miss.Somrudee Jiradol

A Promissory note can be used in many cases such as

1. Debtors (Account Receivable) make a promissory note to pay for assets, goods and services to a
creditor (Account Payable).

2. People make it to be evidence documents for lending money from the bank.

In text book; College account : A promissory note (usually called a note) is a written promise to
pay a specific sum at a definite future date, The note must be signed by the person or business agreeing to
make the payment, known as the maker of the note. The note must be payable to the specific person or
business, known as the payee

Notes are often used when credit is extended for 60 days or more, or when large amounts of
money are involved. Figure shoes one form of promissory note. Sara Morney, the maker of the note,
promises to pay a specific amount of money 250,000 Baht at a definite future time (September 7). Central
Bank, the payee of the note, is to receive the specified amount of money. Notice that to Morney it is a
note payable while to Central Bank it is a note receivable

Accounting for Bill BUNYAWEE SUWANNABOOL

Figure : Promissory note

Payee Maker ISSUE DATE MATURIYY DATE

Central Bank Bunyawee Suwannabool Loan Number 2307
711 Jangwattana Rd. 6/7/25x1
Raksi, BKK 12340 1234 Ramintra Rd. Date 6/9/25x1
250,000 Baht
LENDER Bangkhen, BKK 10220 Maturity Date
‚You‛ means the Lender, its
Successors and assigns. BORROWER Loan Amount

‚I‛ includes each Borrower above, Renewal of

jointly And severally. PRINCIPAL

NOTE – For value received, I promise to pay to you, or your order, at your address above, the principal sum of

Two hundred fifty thousand and no/100 Baht 250,000 .00

Plus Interest from 6/7/57 At the rate of 9% Per year until paid in full.

Payment – I will pay this note as follows : INTEREST RATE
Interest due: 6/9/25x1

Principal Due: 6/9/25x1

Signature Bunyawee Suwannabool

The differences between bill of exchange and promissory note

Bill of Exchange Promissory Note
1.Bill is an order to use money 1. Notes is a promise to use money
2.Involve with 2 or 3 parties 2. Involves only 2 parties
3.The creditor (A/P) issues and debtor 3. The debtor (A/R) makes it for the creditor
approves the bill of exchange
4. No need to approve because the drawee is the
4.The drawee /payer must sign an maker of the promissory note
approval of money to complete
the bill of exchange

Accounting for Bill BUNYAWEE SUWANNABOOL

3. Cheque

CCC Section 987 stated that ‘A cheque is a written instrument by which a person,
Called the drawer, orders a banker to pay on demand a sum of money to, or to the order of, a person,
called the payee.

Cheque involves 3 parties which are
1. The cheque issuer or drawer
2. The Bankor drawee
3. The payee or cheque bearer
CCC Section 988 stated that a cheque must contain the following particulars;
1. The designation of it as a cheque.
2. An unconditional promise to pay a sum certain in money.
3. The name or trade name and address of the banker.
4. The name or trade name of the payee or a mention that it is payable to bearer.
5. The place of payment.
6. The date and place where the cheque is issued.
7. The signature of the drawer.

Calculating the Maturity Date of Notes

If a note does not clearly mention the maturity date; therefore, the maturity date needed to be
calculated.

Calculating the maturity date of note
1. The period of a note is stated in years
2. The period of a note is stated in months
3. The period of a note is stated in days

Accounting for Bill BUNYAWEE SUWANNABOOL

1.5.1 The period of a note is stated in years, the maturity date is the same day next year.
Example 1 A 1-year notes dated 14 March 25x1, would be due on 14 March 25x2.

January 25x1 Sat
1
Sun Mon Tue Wed THU Fri 8
15
234567 22
9 10 11 12 13 14 29
16 17 18 19 20 21
23 24 25 26 27 28
30 31

1 Year

January 25x2 Sat
7
Sun Mon Tue Wed THU Fri 14
123456 21
8 9 10 11 12 13 28
15 16 17 18 19 20
22 23 24 25 26 27
29 30 31

1.5.2 The period of a note is stated in months, the maturity date is calculated by counting the
number of months from the date of issuance. If the issued date is at the last day of the month, the maturity
date must be the last day of the month as well. However, if the maturity date cannot be the exact date, the
last day of the month will be count as the maturity date.

Example 2 A 2-month notes dated 31 July 25x1, would be due on 30 September 25x1

July 25x1 Sat
Sun Mon Tue Wed THU Fri 5
12
1234 19
6 7 8 9 10 11 26
13 14 15 16 17 18
20 21 22 23 24 25
27 28 29 30 31

Accounting for Bill BUNYAWEE SUWANNABOOL

August 25x1 Sat
Sun Mon Tue Wed THU Fri 2
9
1 16
345678 23
10 11 12 13 14 15 30
17 18 19 20 21 22
24 25 26 27 28 29
31

September 25x1 Sat
Sun Mon Tue Wed THU Fri 6
13
12345 20
7 8 9 10 11 12 27
14 15 16 17 18 19
21 22 23 24 25 26
28 29 30

1.5.3 The period of a note is stated in days, the maturity date is calculated by counting the act
number of days from the next day of the date the note is written.

Example 3 A 60-day promissory note dated 16 August 25x1, would be due on 15 October 25x1.

August 25x1 Sat
Sun Mon Tue Wed THU Fri 2
9
1 16
345678 23
10 11 12 13 14 15 30
17 18 19 20 21 22
24 25 26 27 28 29
31

Accounting for Bill BUNYAWEE SUWANNABOOL

September 25x1 Sat
Sun Mon Tue Wed THU Fri 6
13
12345 20
7 8 9 10 11 12 27
14 15 16 17 18 19
21 22 23 24 25 26
28 29 30

October 25x1 Sat
Sun Mon Tue Wed THU Fri 4
11
123 18
5 6 7 8 9 10 25
12 13 14 15 16 17
19 20 21 22 23 24
26 27 28 29 30

or it can be calculated by

August (31-16) = 15 days

September = 30 days

October = 15 days (Maturity date)

Total = 60 days

Thus, the maturity date is 15 October 25x1

Note : The Maturity date is the date on which a note become due and must be paid sometimes note require
monthly installment (or payment)

Accounting for Bill BUNYAWEE SUWANNABOOL

Calculating Interest of Notes

To calculate interest, the formula below is used
Interest = Principal or Face Value x Interest Rate x Time in Terms of a Year

If it is Interest-bearing note, it requires the payment of principal plus interest when the note is
due. The payee gets the interest receivable while the maker counts as interest payable.

Notes for a period of a year.

Example 4 Mr.JR issued a 1 year promissory note valued at 45,000 Baht dated 20 June 25x2
with an interest rate of 10% p.a (per annum)

To calculate interest for one year:

Interest = 45,000 x x 1

= 4,500 Baht

Notes for a period of a month.

Example 5 Mr.JJ issued a 3-month promissory note valued at 80,000 Baht due dated 1 July 25x1
with an interest rate of 10% per annum.

To calculate interest:

Interest = 80,000 x x

= 2,000 Baht

Notes for a period of a days.

A 365-day year is used for calculation; however, for convenience, a business year or a 360-day

year can be used as well.

Example 6 Mr. JJ issued a 60-day note valued at 80,000 baht dated 1 Jun 25x1 with an interest

rate of 10% per annum.

To calculate interest for one year:

Interest = 80,000 x x 10% x = 1,315.07 Baht

Accounting for Bill BUNYAWEE SUWANNABOOL

If knowing only an interest of the note but not the value, interest rate and time of note, the interest
formula can be used as following;

Notes in a period of a year. Interest x 100
Interest Rate x 1 (Year)
Principal of the Note =
Interest x 100
Interest Rate = Principal x 1 (Year)

Period of Year (1 Year) = Interest x 100
Principal x Interest Rate

Notes in a period of a month.

Principal = Interest x 12 x 100
Interest Rate x Period of month

Interest Rate = Interest x 12 x 100
Principal x Period of month

Period of months = Interest x 12

Principal x Interest Rate

Notes in a period of a days. Interest x 365 x 100
Interest Rate x Period of days
Principal =

Interest Rate = Interest x 365 x 100
Principal x Period of days

Period of days = Interest x 365 x 100
Principal x Interest Rate

Accounting for Bill BUNYAWEE SUWANNABOOL

LEARNING KEY

I = Amount of Interest I =P x Rx T
P = Amount of Principal
R = Rate of Interest (annual)
T = Term of the Notes (Period of note in a year)

Accounting for Bill BUNYAWEE SUWANNABOOL

Chapter 2
Note Receivable

Contents

1. Definition of Note Receivable
2. Note Receivable Account Recording
3. Note Receivable from Selling Goods
4. Note Receivable from Debtor’s Payment
5. Note Receivable from Selling Assets
6. Note Receivable from Loans

Learning Objectives
1. To be able to define and explain note receivable
2. To be able to record note receivable account from selling goods
3. To be able to record note receivable account from debtor’s payment
4. To be able to record note receivable account from selling assets
5. To be able to record note receivable account from loans

Accounting for Bill BUNYAWEE SUWANNABOOL

Chapter 2
Note Receivable

Definition of Note Receivable

Note receivable means a bill of exchange or a promissory note that business receives money on
the face value when it reaches the maturity date. As it stated the time of payment within 1 year or less; for
example, 30-day, 60-day or 1 or 2-month, thus it is considered as current assets of the business.

Note that business receives from selling merchandise or debt payments are Note receivable which
can be categorized in 2 type;

1. Promissory Note that business accepts from a debtor and debtor directly mentions business

as a payee or a promissory note from other that debtor transfer to business.

2. Bill of Exchange that business issues for debtor to approve and mention business as a

payee or a bill of exchange from other that debtor transfer to business.

Note Receivable Account Recording

Note receivable account recording will be used in the case below;
1. Note receivable account recording

1.1. Note Receivable from sold merchandise
1.2. Note Receivable from debtor’s payment or payment form Account Receivable
1.3. Note Receivable from sold assets
1.4. Note Receivable from loans
2. Note Receivable record when it reaches the maturity date

Note Receivable from Sold merchandise

When sales of goods or services on credit; on the trade date seller may receive payment in note
receivable.

Example 1 On 16 April 25x1, business sold merchandise worth 80,000 Baht to JJ shop with 7%
value added tax and business accepted the payment in 2 months promissory note with an interest rate of
8% p.a (per annum , per year)

Accounting for Bill BUNYAWEE SUWANNABOOL

Accounting record on the date of receiving Note Receivable

General Journal Page 1

Date Transactions A/C Debit Credit
No.
80,000 -
25x1 85,600 - 5,600 -

Apr 16 Note Receivable
Sales
Output Tax (Sales Tax)

Received promissory note for merchandise sale

Accounting record of Note Receivable’s maturity date

General Journal Page 1

Date Transactions A/C Debit Credit
No.
85,600 -
25x1 86,741 33 1,141 33
Jun 16 Cash

Note Receivable
Interest Income
Payment as face value and interest received on
the maturity date (85,600 x x )

Accounting for Bill BUNYAWEE SUWANNABOOL

Note Receivable from Debtor’s Payment

When sales of goods or services on credit; it will be recorded in accounts receivable. When
reaching the maturity date, debtor cannot pay cash; instead, debtor makes a bill to pay the business.

Example 2 On 16 April 25x1, business sold merchandise 80,000 Baht to JJ shop with 7%
value added tax, 2/10, n/30. 16 May 25x1, JJ shop sent a promissory note of 85,650 Baht as a debt
payment in 20-day with an interest rate of 8% per year

General Journal A/C Page 1
No.
Date Transactions Debit Credit

25x1 85,650 -
Apr 16 Account Receivable – JJ Shop
80,000 -
Sales 5,650 -
Output Tax
Sold merchandise on credit for JJ Shop,2/10,n/30

May 16 Note Receivable 85,650 -
Account Receivable – JJ Shop
85,650 -
A 20-day promissory note with an interest rate of
8% p.a. received.

Jun 5 Cash 86,025 45
Note Receivable
Interest Income 85,650 -
375 45
Payment as face value and interest received on
the maturity date (85,650 x x )

Accounting for Bill BUNYAWEE SUWANNABOOL

Note Receivable from sold Assets

When selling other non-current assets, such as lands, buildings, machines, office equipment and
so on, which have high value, business may receive note instead of cash from buyer.

Example 3 On 11 March 25x1, business accepted a promissory note from JR shop 200,000 Baht
with 3-month time period and an interest rate of 9% p.a. from selling office equipment.

Accounting record Page 1
General Journal
Debit Credit
Date Transactions A/C
No.

25x1 200,000 -
Mar 11 Note Receivable
200,000 -
Office Equipment
A promissory note received as a payment for
office equipment

Jun 11 Cash 204,500 -
Note Receivable
Interest Income 200,000 -
4,500 -
Payment as face value and interest received on
the maturity date (200,000 x x )

Accounting for Bill BUNYAWEE SUWANNABOOL

Note Receivable from Loans

When business lend money to outsider or persons in the business, to guarantee the return of total
money on time; business may have borrowers make Note as evidences of loans.

Example 4 AF shop, a business’s customer, borrowed 500,000 Baht from the business and made
a 3-month promissory note issue date 14 June 25x1 with an interest rate of 8% p.a. to the business.

General Journal A/C Page 1
No.
Date Transactions Debit Credit

25x1 500,000 -
Jun 14 Note Receivable
500,000 -
Cash
A promissory note received from loan

Sep 14 Cash 510,000 -
Note Receivable
Interest Income 500,000 -
10,000 -
Payment as face value and interest received on
the maturity date (500,000 x x )

For non-interest bearing note, when reaching the maturity date, accounting records are below.

General Journal Page 1

Date Transactions A/C Debit Credit
No.

25x1 500,000 -
Sep 11 Cash
500,000 -
Note Receivable
Payment as face value received on the maturity date

Accounting for Bill BUNYAWEE SUWANNABOOL

Chapter 3
Notes Payable Account

Contents

1. Definition of notes payable
2. Notes payable account recording
3. Notes payable issuing for goods payment / purchases merchandise
4. Notes payable issuing to creditor
5. Notes payable issuing for purchasing assets
6. Notes payable issuing for bank loans

Leaning Objectives

1. To be able to define and explain Notes payable
2. To be able to record Notes payable account

Accounting for Bill BUNYAWEE SUWANNABOOL

Chapter 3
Notes Payable Account

Definition of Notes Payable

Notes payable means a bill of exchange or a that business approves or issues to creditors and
business has to pay money on the face value when it reaches the maturity date. Notes payable is
considered as liabilities of the business.

Notes Payable Account Recording

Notes payable account recording will be used in the case below;
1. Notes payable account recording

1.1. Notes payable for purchased merchandise
1.2. Notes payable to creditors or account payable
1.3. Notes payable for purchasing assets
1.4. Notes payable for bank loans
2. Notes payable record when it reaches the maturity date. When a Notes payable reaches its
maturity date, a payee is the Note bearer which may be a person who receives the Note from business or
any other persons, because Notes can be transferred or discounted.
If business issues a promissory note or approves a bill of exchange for buying goods or pay for
debts; Notes payable, which is considered as business’s liabilities, will be recorded in Notes payable
account under credit and equal to the face value. When reaching the maturity date, the account recorded
under debit is equal to the face value as well.

Notes Payable Issuing for Purchased Merchandise

When purchase merchandise (buying goods) or services on credit in great amount and long credit
term; business may use Notes payable as payments.

Example 1 On 18 July 25x1, business purchases merchandise 8,000 Baht from Namthip Shop
with 7% value added tax and business issued the payment in a 2-month promissory note with an interest
rate of 7% p.a.

Accounting for Bill BUNYAWEE SUWANNABOOL

Accounting record on the date of issuing Notes payable Page 1
General Journal
Credit
Date Transactions A/C Debit
No. 8,560 -

25x1 8,000 -
Jul 18 Purchase 560 -

Input Tax
Note Payable

A promissory note issued as a payment.

Sep 18 Note Payable 8,560 -
Interest Expense 99 87
Cash / Bank account
Payment as face value paid on the maturity date. 8,659 87
8,560 x 7% x 2/12

Notes Payable Issuing to Creditors

Business may ask for an extension of time if it is unable to pay an account when due by issuing

Notes to creditors as a payment instead of cash.

Example 2 On 18 July 25x1, business purchased merchandise 5,000 Baht from FA shop with 7%

value added tax under 2/10 and n/30. On the maturity date, business cannot pay and issue a 45-day

promissory note with an interest rate of 8% p.a. as a debt payment to FA shop.

General Journal Page 1

Date Transactions A/C Debit Credit
No.

25x1 5,000 -
Jul 18 Purchases 350 -

Input Tax 5,350 -
Account Payable -FA Shop

Purchased on credit

Accounting for Bill BUNYAWEE SUWANNABOOL

General Journal A/C Page 2
No.
Date Transactions Debit Credit

25x1 5,350 -
Aug 17 Account Payable – FA Shop
5,350 -
¤ Note Payable
A 45-day promissory note with an interest rate of
8% p.a. issued

Oct 1 Note Payable 5,350 -
Interest Expense 52 77
Cash / Bank account
Payment as face value and interest paid on the 5,402 77
maturity date. 5,350 x 8% x 45/365

Notes Payable Issuing for Purchasing Assets

When buying or purchasing assets with high value for business operation, business may use notes
payable as a payment.

Example 3 On 7th September 25x1, business issued a 90-day promissory note with an interest
rate of 9% p.a. to pay for office equipment 36,000 Baht with 7% value added tax to PP company Ltd.

Accounting record

General Journal Page 1

Date Transactions A/C Debit Credit
No.

25x1 Office equipment 36,000 -
Sep 7 Input Tax 2,520 -

Note Payable 38,520 -
A promissory note issued as a payment for office
equipment

Accounting for Bill BUNYAWEE SUWANNABOOL

General Journal Page 2

Date Transactions A/C Debit Credit
No.

25x1 Note Payable 38,520 -
Dec 6 Interest Expense (38,520 x 9% x 90/365) 854 83

Cash / Bank account 39,374 83
Payment as face value and interest paid on the
maturity date.

Notes Payable Issuing for Bank Loans

Sometimes business needs working capital for operations such as expanding the business,
investing or paying debts to creditors when reaching the maturity date. Thus, business finds funding by
issuing a promissory note to borrow money from banks or financial institutions. Getting a bank’s loans
with a promissory note categorizes in 2 cases;

1. Receiving loans by issuing interest bearing promissory note – business will

receive the same amount of money as on the face value and need to pay principal plus interest on the
maturity date.

Example 4 On 10 May 25x1, business borrowed money from a bank and issued a 3-month
promissory note worth 50,000 Baht with an interest rate of 9% p.a.

- Business received 50,000 Baht
- The maturity date was 10 August 25x1
On the maturity date, business needs to pay the bank as below;

The face value 50,000 Baht
Plus interest (50,000 x 9% x 3/12) 1,125 Baht
Total payment to the bank 51,125 Baht

Accounting for Bill BUNYAWEE SUWANNABOOL

Accounting record on the date of receiving bank’s loans

General Journal Page 1

Date Transactions A/C Debit Credit
No.

25x1 50,000 -
May 10 Cash / Bank account
50,000 -
Note Payable
Received loans from issuing an interest bearing
promissory note.

Notes payable’s maturity date

General Journal Page 1

Date Transactions A/C Debit Credit
No.
50,000 - 51,125 -
25x1 1,125 -
Aug 10 Note Payable

Interest expense
¤ Cash / Bank account
Payment as face value and interest paid.

2. Receiving loans by issuing non-interest bearing promissory note – the bank

takes interest in advance by deducting from the face value. Borrower receives the rest of the money after
interest deduction. In this case, it is called bank discount. This discount is a prepaid interest of borrower.
The maturity value equals the principal on the Note.

Example 5 On 10th May 25x1, business borrowed money from a bank and issued a 3-month non-
interest bearing promissory note worth 50,000 Baht and the bank discount at 9% p.a.

Calculating the amount of loans receiving from the bank;

Accounting for Bill BUNYAWEE SUWANNABOOL

The face value 50,000 Baht
Minus Discount (50,000 x 9% x 3/12) 1,125 Baht
Total loans receiving from the bank 48,875 Baht

Accounting record on the date of receiving bank’s loans

General Journal Page 1

Date Transactions A/C Debit Credit
No.
50,000 -
25x1 48,875 -
May 10 Cash / Bank account 1,125

Interest Expense
Note Payable

Received loans from issuing a non-interest bearing
promissory note.

Aug 10 Note Payable 50,000 -
Cash / Bank account
50,000 -
Payment as face value paid.

Receiving loans by issuing non-interest bearing promissory note by indicating the
wanted amount of money

From example 5, business borrows 50,000 Baht but only receives actual money after bank
discounted of 48,875 baht, which is lower than the requested amount. However, if business needs the total
amount of 50,000 Baht, business has to issue a non-interest bearing promissory note higher amount than it
wants to get the equal amount after the bank discount.

Example 6 On 10 May 25x1, business needs a 50,000 Baht loan from a bank and issued a
3-month non-interest bearing promissory note worth 50,000 Baht and the bank discount at 9% p.a..

Accounting for Bill BUNYAWEE SUWANNABOOL

1. Calculate discount – the bank discount is 9% p.a. = 2.25 Baht
Principal 100 Baht, the bank discounted (100 x 9% x 3/12) = 97.75 Baht
If issuing 100 Baht, the bank pays (100-2.25)

2. Calculate issued date = 100 Baht
If wanting 97.75 Baht, the business has to issue = 50,000 x 100 Baht
If wanting 50,000 Baht, the business has to issue
97.75
3. Proving the receiving amount = 51,150.90 Baht

If receiving loans 51,150.90 Baht, the bank discounts = 51,150.90 x 9% x 3/12 Baht
= 1,150.90 Baht
Thus, borrower receives from the bank in total
51,150.90 – 1,150.90 = 50,000 Baht

Accounting record on the date of receiving bank’s loans

General Journal Page 1

Date Transactions A/C Debit Credit
No.

25x1 50,000 -
May 10 Cash / Bank account 1,150 90

Interest Expense 51,150 90
Note Payable

Received loans from issuing a non-interest
bearing promissory note.

Aug 10 Note Payable 51,150 90
Cash / Bank account 51,150 90

Payment as face value paid.

Accounting for Bill BUNYAWEE SUWANNABOOL

Chapter 4
Notes Discounted Selling

Contents

1. Reasons for notes discounted selling to the bank
2. Non-interest bearing notes receivable selling
3. Interest bearing notes receivable selling
4. Showing notes receivable transactions in financial statement

Learning Objectives

1. To be able to explain reasons for notes discounted selling to the bank
2. To be able to calculate the amount of money receive after selling notes discounted to the bank
3. To be able to record entries on notes discounted selling to the bank

Accounting for Bill BUNYAWEE SUWANNABOOL

Chapter4
Notes Discounted Selling

Reasons for Selling Notes Discounted to the Bank

The reason for selling notes discounted to the bank is the business needs to use money before
notes reach maturity dates. Therefore, business sells its note receivable to the bank, and then the bank
calculates discount on the selling date until the maturity date. In this case, discount is bank discount that
the bank takes interest in advance. On notes discounted selling, business possesses no responsibility once
the bank collects the money of the note; nonetheless, if the bank cannot collect money, the bank will
request business, instead of debtor to pay all the money.

Calculate the amount of money and record on Notes discounted selling

Non-Interest Bearing Notes Receivable

There are 5 steps on calculation;

1. Calculate the maturity value = The Face Value
2. Calculate the maturity date
3. Calculate the note discount time (counting from the selling date to the maturity date)
4. Calculate the bank discount = Maturity Value x Time x Discount rate
5. Calculate the net amount received = Maturity Value – Bank Discount

Example 1 The business had a 60-day non-interest bearing note receivable value 35,000 Baht,
dated on 15 March 25x1 and sold to the bank on 26 March 25x1. The bank discount is at 9% p.a. when
reaching the maturity date, the bank informed completion on note’s value receiving.

Accounting for Bill BUNYAWEE SUWANNABOOL

Calculation of the proceed from selling bill are following;

Step 1 The maturity value = 35,000 Baht

Step 2 Calculate the maturity date

Mar (31-15) = 16 days

Apr = 30 days

May = 14 days 15 Mar 14 May

Total = 60 days 26 Mar 60 D
The maturity date is 14 May 25x1

Step 3 Calculate the note discount time (counting from the selling date to the maturity date)

- Selling note discounted on 26 March 25x1

- The maturity date is 14 May 25x1

Mar (31 - 26) = 5 days

Apr = 30 days

May = 14 days

The note discounted time is = 49 days

Step 4 Calculate the bank discount = 35,000 x 9% x 49/365

= 422.87 Baht

Step 5 Calculate the proceed = 35,000 – 422.87

= 34,577.13 Baht

General Journal A/C Page 1
No.
Date Transactions Debit Credit

25x1 34,577 13
Mar 26 Cash / Bank account 422 87

Interest Expense 35,000 -
Note Receivable Discounted

Sold notes discounted at 9% to the bank.

Accounting for Bill BUNYAWEE SUWANNABOOL

Date Transactions A/C Debit Credit
No.
25x1
May 14 Note Receivable Discounted 35,000 -

Note Receivable 35,000 -
Cancelled the notes receivable entry

Interest Bearing Notes Receivable

There are 2 cases which are;

1. Interest of the Note is more than the selling discount amount, the

calculate is following;

1.1 Calculate the maturity value = The Face Value + Interest

1.2 Calculate the maturity date

1.3 Calculate the note discount time (counting from the selling date to the maturity date)

1.4 Calculate the bank discount = Maturity Value x Time x Discount rate

1.5 Calculate the net amount received = Maturity Value – Bank Discount

Example 2 The business had a 90-day interest bearing 8% notes receivable value 60,000 Baht,

dated on 3 February 25x1 and sold to the bank on 4 March 25x1. The bank discount is at 9% p.a. when

reaching the maturity date, the bank informed completion on bill’s value receiving.

Calculation of the proceed from selling Note are following;

Step 1 The maturity value = 60,000 + (60,000 x 8/100 x 90/365)

= 60,000 + 1,183.56

= 61,183.56 Baht 3 Feb 4 May
Step 2 Calculate the maturity date
25 days 4 Mar 61,183.56
Feb (28 - 3) = 31 days 61,183.56 -920.62 =60,263.30 90 D
Mar = 30 days
Apr =

May = 4 days

Total = 90 days

The maturity date is 4 May 25x1

Accounting for Bill BUNYAWEE SUWANNABOOL

Step 3 Calculate the note discount time (counting from the selling date to the maturity date)

- Selling note discounted on 4 Mar 25x1

- The maturity date is 4 May 25x1

Mar (31 - 4) = 27 days

Apr = 30 days

May = 4 days

The note discounted time is = 61 days

Step 4 Calculate the bank discount = 61,183.56 x 9% x 61/365

= 920.26 Baht

Step 5 Calculate the proceed = 61,183.56 – 920.26

= 60,263.30 Baht

General Journal Page 1

Date Transactions A/C Debit Credit
No.

25x1 Cash / Bank account 60,263 30
Mar 4 Note Receivable Discounted
Interest Income
60,000 -
Sold notes discounted at 9% to the bank. 263 30

May 4 Note Receivable Discounted 60,000 -
Note Receivable
60,000 -
Cancelled the Notes receivable entry.

3 Feb 4 Mar 61 D 4 M90ayD
60,000 61,183.56 x 9% x 36615 = 920.26
61,183.56 - 920.26 60,000 + (60,000 x 8% x39605 )
60,263.30 60,000 + (1,183.56)
61,183.56

Accounting for Bill BUNYAWEE SUWANNABOOL

2. The selling discounted amount is more than the interest of the note

Example 3 From information on example 2; the bank discount is 13% p.a.

Step 4 Calculate the bank discount

= 61,183.56 x 13% x 61/365

= 1,329.27 Baht 3 Feb 4 May

Step 5 Calculate the proceed 61,183.56
= 61,183.56 – 1,329.27
= 59,854.29 Baht 4 Mar
61,183.56 -1,329.27 = 59,854.29

General Journal Page 1

Date Transactions A/C Debit Credit
No.
25x1
Mar 4 Cash / Bank account 59,854 29
Interest Expense 145 71

Note Receivable Discounted 60,000 -
Sold notes discounted at 13% to the bank.

May 4 Note Receivable Discounted 60,000 -
Note Receivable
60,000 -
Cancelled the Notes receivable entry.

For accounting record on the date of selling notes discounted to the bank, the entry is recorded
only for business that sells the notes discounted; while, the business who pays, the entry is recorded on the
maturity date. The rules of accounting record is when selling notes discounted, it means the notes
receivable is replaced of notes receivable credit, and will be recorded in notes discounted credit. For
selling notes discounted, issued business has to hold responsible until the bank collects the money. The
selling date cannot tell whether the bank will receive the money on the maturity date or not; therefore, the
entry is filled on notes discounted beforehand. Notes discounted account is counted as debts that may
occur until it reaches the maturity date and if the bank collects the maturity value, the entry is cancelled by
debiting the notes discount from the note receivable.

Accounting for Bill BUNYAWEE SUWANNABOOL

Showing Notes Receivable Transactions in Financial Statement

The bill that valid within a year is shown in the financial statement under current assets category
which account receivables, net also includes or it can be shown separately in the Notes receivable account.
If the business has Notes discounted, it needs to subtract Notes discounted from the total amount of Notes
receivable to get the remaining amount of the bills. Thus, the business needs to reveal in the footnotes to
financial statement in order to understand the expected debts business has after selling Notes discounted.

Ek shop
Statement of financial position (Partial)

31st December 25x1
Assets

Current assets 60,000
Notes Receivable 40,000 20,000
Minus Notes Receivable discounted

Accounting for Bill BUNYAWEE SUWANNABOOL

Chapter 5
Bills Endorsement

Contents

1. Definition of Bills Endorsement
2. Types of Bill Endorsement
3. Aval
4. Bills Endorsement without Interest
5. Bills Endorsement with Interest

Learning Objectives

1. To be able to define and categorize types of bills endorsement
2. To be able to calculate the amount of money from bills endorsement
3. To be able to record entries on bills endorsement

Accounting for Bill BUNYAWEE SUWANNABOOL

Chapter 5
Bills Endorsement

Definition of Bills Endorsement

Bill endorsement means the holder of the bill or endorsee can transfer the bill. By endorse it and
sent to creditor which payee name can be specified, it is called special endorsement. By signing on the back

of the bill, it is called ‘Blank endorsement’ and endorser will become debtor because the person is

responsible for the bill. When reaching the maturity date, if the endorsee cannot collect money, the endorser
has to pay the face value plus interest (if any) and note of protest fees.

Types of Bill Endorsement

There are 2 types of bill endorsement;

1. Special endorsement – The holder of the bill specified endorsee and signed.

Normally the endorser will write in the back of the bill.

Example of Special endorsement
Payment for Miss Charinee Srimora

Bunyawee S.

10 Sep 25x1

2. Blank endorsement – The holder of the bill only signed without given endorsee name. If the

endorser signed in front of the bill, the endorser will become aval receiver as responsible as
guarantor.

Example of Blank endorsement

Bunyawee S.

10 Sep 25x1

Accounting for Bill BUNYAWEE SUWANNABOOL

Aval

Aval is a payment of a bill guarantee by a surety. An aval may be given by a third person or even
by any party to the bill. (CCC Section 983)

Thus, the giver of an avail can be a third person such as a bank, or any party to the bill who
guarantee to pay the amount of money on the bill.

An aval is given when the giver of the aval or the bill guarantor expresses in front of the bill (bill of
exchange, promissory note and cheque) by the words ‘good as aval’ or by any equivalent expression and
signed by the giver of aval.

Calculate the amount of money and record on bill

Bills of exchange and promissory notes can be transferred to other persons by endorser writing a
payee name with a signature. Drawer does not need to know whom the payee is. On the payment date, the
drawee does not record the accounting entry, only endorser and endorsee do the record.

Therefore, endorsement only involves endorser and endorsee. They have to agree on the transferred
value by considering;

Bills Endorsement without Interest

Transferred value can be priced in 3 types which are;

1.1. Transferred value with arbitrary price – which is from the negotiation between endorser

and endorsee

1.2. Transferred value with a discount from the face value when reaching maturity date by

calculating the transferred value in 5 step as following;

Step 1 Calculate the maturity value = The Face Value

Step 2 Find the maturity date

Step 3 Find the bill transferring time (counting from the transferring date to the

maturity date)

Step 4 Calculate the bank discount = Maturity Value x Time x Discount rate

Step 5 Calculate the proceed = Maturity Value – Bank Discount

1.3. Transferred value with the present value on the transferring date by comparing the maturity

value as the present value

Accounting for Bill BUNYAWEE SUWANNABOOL

Example 1 On 11 July 25x1, business received a 60-day non-interest note receivable worth
15,000 Baht as a debt payment from Mr.Thanon. On 2 August 25x1, business endorsed the bill to pay
debts to Mr.Thana

1. Transferred value with arbitrary price – Thana received 14,700 Baht. The

difference between the face value and the transferred value is discount = 300 Baht. For this discount,
endorser counted as interest expense and endorsee counted as interest income.

Business (Endorser) Thana (Endorsee)

25x1 25x1

Aug 2 A/P – Thana 14,700 Aug 2 Notes Receivable 15,000

Interest Expense 300 A/R (business) 14,700

Notes Receivable 15,000 Interest Income 300

Recorded bill transferred Recorded transferred bill receiving

รบั โอนตามราคาท่ขี อหกั ส่วนลดจากมูลคา่ ตวั๋ เมื่อถึงวนั ครบกาหนด

2. Transferred value with a discount from the face value when reaching maturity
date – Mr. Thana accepted the transferred with a discount rate of 10% p.a.

Calculation of the transferred money is in 5 steps as following;
Step 1 The maturity value = 15,000
Step 2 Find the maturity date
25x1 Jul (31 - 11) = 20 days
Aug = 31 days
Sep = 9 days
Total = 60 days
The maturity date is 9 September 25x1
Step 3 Find the bill discount time (counting from the transferring date to the maturity

date)
25x1 Aug (31 - 2) = 29 days
Sep = 9 days

The bill transferring time is = 38 days (ระยะเวลาโอนตว๋ั )

Accounting for Bill BUNYAWEE SUWANNABOOL

Step 4 Calculate the bank discount = Maturity Value x Time x Discount rate

คานวณหาส่วนลด = 15,000 x 10% x 38/365

= 156.16 Baht

Step 5 Calculate the proceed = Maturity Value – Bank Discount

จานวนเงินท่ีรบั โอน = 15,000 – 156.16 Baht

= 14,843.84 Baht

The difference between the face value and the transferred value is discount equal to

= 15,000 – 14,843.84

= 156.16 Baht

Business (Endorser) Thana (Endorsee)

25x1 25x1

Aug 2 A/P – Thana 14,843.43 Aug 2 Notes Receivable 15,000

Interest Expense 156.16 A/R (business) 14,843.84

Notes Receivable 15,000 Interest Income 156.16

Recorded bill transferred Recorded transferred bill receiving

รบั โอนตามราคามูลค่าปัจจบุ นั ณ วนั โอน

3. Transferred value with the present value on the transferring date by comparing

the maturity value to be the present value

In case that Thana accepted the transferred with an interest rate or a discount rate of 10% p.a.

1. The maturity value = 15,000

2. The bill transferring time is 38 days

If the present value = 100 Baht

The maturity value = 100 + interest expense (Discount)

= 100 + (100 x 10% x 38/365 = 1.04)

= 101.04 Baht

Using ‘Rule of Three’ for comparison

If the maturity value = 101.04 Baht, the present value = 100 Baht

If the maturity value = 15,000 Baht, the present value

= 15,000 x 100/101.04

= 14,845.61 Baht

Accounting for Bill BUNYAWEE SUWANNABOOL

The difference between the face value and the transferred value is discount equal to 15,000 –
14,845.61 = 154.39 Baht. For this discount, endorser counted as interest expense and endorsee counted as
interest income.

Business (Endorser) Thana (Endorsee)

25x1 25x1

Aug 2 A/P – Thana 14,845.61 Aug 2 Notes Receivable 15,000

Interest Expense 154.39 A/R (business) 14,845.61

Notes Receivable 15,000 Interest Income 154.39

Recorded bill transferred Recorded transferred bill receiving

Accounting record on the maturity date

On the maturity date, only Thana (payee) and Thanon (payer) record the accounting entry, the

business (endorser) does not need to record the entry.

Thana (Payee) Thanon (Payer)

25x1 25x1

Aug 2 Cash / Bank 15,000 Aug 2 Notes Payable 15,000

Notes Receivable 15,000 Cash / Bank 15,000

Recorded the maturity value Paid the maturity value

Bills Endorsement with Interest

Transferred value can be priced in 3 types which are similar to bills endorsement with Interest; however,
interests are included for calculation;

1. Transferred value with arbitrary price – which is from the negotiation between endorser and
endorsee

2. Transferred value with a discount from the face value when reaching maturity date by calculating
the transferred value in 5 step as following;
Step 1 Calculate the maturity value = The Face Value + Interest at Maturity
Step 2 Find the maturity date
Step 3 Find the bill transferring time

Accounting for Bill BUNYAWEE SUWANNABOOL

Step 4 Calculate the bank discount
= Maturity Value x Transferred Time x Discount rate

Step 5 Calculate the proceed
= Maturity Value – Bank Discount

3. Transferred value with the present value on the transferring date, the present value of bill with
interest = Face Value + Bill’s Interest (from the day after the
issuing date to the transferring date)

Example 2 On 11 July 25x1, business received a 60-day note receivable worth 15,000
Baht with an interest rate of 6% p.a. as a debt payment from K Shop. On 2 August 25x1, business endorsed
the bill to pay debts to Thana.

1. Transferred value with arbitrary price – same calculation and record as the note

endorsement without interest.

Business (Endorser) Thana (Endorsee)

25x1 25x1

Aug 2 A/P – Thana 14,700 Aug 2 Notes Receivable 15,000

Interest expense 300 A/R (business) 14,700

Notes Receivable 15,000 Interest income 300

Recorded bill transferred Recorded transferred bill receiving

2. Transferred value with a discount from the face value when reaching maturity
date which can divide into 2 cases;

(1) The transferred value is lower than the face value; if Thana accepted
the transferred with a discount rate of 10% p.a.

Calculation of the transferred money is in 5 steps as following;
Step 1 The maturity value
= the face value + interest at maturity
= 15,000 + (15,000 x 6% x 60/365 )
= 15,000 + 147.95 (interest income)
= 15,147.95 Baht

Accounting for Bill BUNYAWEE SUWANNABOOL

Step 2 Find the maturity date
25x1 Jul (30 - 11) = 20 days
Aug = 31 days
Sep = 9 days
Total = 60 days
The maturity date is 9 September 25x1

Step 3 Find the bill transferring time
25x1 Aug (31 - 2) = 29 days
Sep = 9 days
The bill transferring time is = 38 days

Step 4 Calculate the bank discount
= Maturity Value x Transferred Time x Discount rate
= 15,147.95 x 10% x 38/365
= 157.70 Baht

Step 5 Calculate the proceed
= Maturity Value – Discount
= 15,147.95 – 157.70 Baht
= 14,990.25 Baht

In this case, the transferred money is less than the face value which the difference is
15,000 – 14,990.25 = 9.75 Baht. The endorser counts the amount as loss from transfer and records it in
interest expense account; while the endorsee counts as profit and records it in interest income account.

Business (Endorser) Thana (Endorsee)

25x1 25x1

Aug 2 A/P - Thana 14,990.25 Aug 2 Notes Receivable 15,000

Interest Expense 9.75 A/R (business) 14,990.25

Notes Receivable 15,000 Interest income 9.75

Recorded bill transferred Recorded transferred bill receiving

Accounting for Bill BUNYAWEE SUWANNABOOL

(2) The transferred value is higher than the face value; if Thana accepted

the transferred with a discount rate of 8% p.a.

Calculation of the transferred money is in 5 steps as following;

Step 1 The maturity value = 15,147.95 Baht

Step 2 The maturity date is = 9 September 25x1.

Step 3 The bill transferring time is = 38 days

Step 4 Calculate the bank discount = 15,147.95 x 8% x 38/365

= 126.16 Baht

Step 5 Calculate the proceed = 15,147.95 – 126.16

= 15,021.79 Baht

In this case, the transferred money is more than the face value which the difference is 15,021.79 -
15,000 = 21.79 Baht. The endorser counts as profit from transfer and records it in interest income account;
while, endorsee counts as loss and records it in interest income on debit side. When it reaches the maturity
date, the endorsee will record full amount. Interest income from credit and debit will deduct and leave the
rest as a discount 147.95 – 21.79 = 126.16 Baht

Business (Endorser) Thana (Endorsee)

25x1 25x1

Aug 2 A/P - Thana 15,021.79 Aug 2 Notes Receivable 15,000

Notes Receivable 15,000.- Interest income 21.79

Interest Income 21.79 A/R (business) 15,021.79

Recorded bill transferred Recorded transferred bill receiving

(3) Transferred value with the present value on the transferring date

The Present Value of Bill with interest = The Face Value + Interest at Maturity
(from the day after the issuing date to the transferring date)

Example 3 from Example 2 11 July 25x1
- The issuing date is 2 August 25x1
- The transferring date is

- The bill transferring time

Accounting for Bill BUNYAWEE SUWANNABOOL

25x1 Jul (31 – 11) = 20 days
Aug = 2 days
Total = 22 days
= 15,000 + (15,000 x 6% x 22/365X)
Therefore, the present value = 15,000 + 54.25
= 15,054.25 Baht

Business (Endorser) Thana (Endorsee)

25x1 25x1

Aug 2 A/P - Thana 15,054.25 Aug 2 Notes Receivable 15,000

Notes Receivable 15,000.- Interest income 54.25

Interest Income 54.25 A/R (business) 15,054.25

Recorded bill transferred Recorded transferred bill receiving

On the maturity date, Thana (payee) and Thanon (payer) record the accounting entry.

Thana (Endorsee) Thanon (payer)

25x1 25x1

Aug 2 Cash / Bank 15,147.95 Aug 2 Notes Payable 15,000.-

Notes Receivable 15,000.- Interest expense 147.95

Interest income 147.95 Cash / Bank 15,147.95

Received the maturity value Paid the maturity value with interest

with interest

Accounting for Bill BUNYAWEE SUWANNABOOL

Chapter 6
Dishonored Note

Contents

1. Definition of dishonored note receivable
2. Types of dishonored note receivable
3. Dishonored note receivable
4. Dishonor discounted note receivable
5. Dishonor transferred note receivable
6. Definition of dishonored note payable
7. Calculating and recording dishonored note payable entry

Learning Objectives
1. To be able to define and explain dishonored note receivable
2. To be able to calculate and record entries on dishonored note receivable
3. To be able to define and explain dishonored note payable
4. To be able to calculate and record entries on dishonored note payable

Accounting for Bill BUNYAWEE SUWANNABOOL

Chapter 6
Dishonored Note

Definition of Dishonored Note Receivable

Dishonor of note receivable means a bill of exchange or a promissory note that drawee does
not pay when due. A holder or payee has the right to demand the money from the endorser, drawer or
drawee.

When the note reaches its maturity date, but the drawee refuses to pay; the Note will become
dishonored Note. To enforce by law, drawer or payee needs to do a paper work called ‘’Note of protest”,
which can be processed at the district within 3 days from the maturity date. The person who processes a
note of protest or agent can be a sheriff or deputy sheriff or lawyer who is assigned on this issue. After
finish the note of protest, it needed to be sent to drawee of the note for debt payment.

Due to the dishonored note, Payee of the note has the right to demand;
1. The face value with maturity interest (if it is an interest bearing note)
2. Overdue interest from the maturity date to the payment date (calculate at the rate of 5% p.a.)
3. Fees on note of protest and other fees

Types of Dishonor of Note Receivable

Dishonored of Note Receivable can be categorized in 3 types;
1. Dishonored Note Receivable
2. Dishonored Note Discounted
3. Dishonored Note Transferred / Endorsed

Dishonored Note Receivable

Dishonored note receivable means a note that business has the right to receive money and hold
until the maturity date; however when reaching the maturity date, drawee cannot pay to the business.

In accounting, holder will cancel that note and make the former debtor to be a new debtor with
the principal plus the maturity interest (if it is an interest bearing note) and fees on note of protest that the
business paid. When the debtor can pay the money, business will record the amount of money that it

Accounting for Bill BUNYAWEE SUWANNABOOL

set with an overdue interest rate of 5% p.a. or any rate that both parties agree by calculating from the
principal and the period of time from the maturity date to the payment date.

Calculate the amount of money and record on Dishonored Note

Example 1 On 8 April 25x1, business received a 60 days bill of exchange worth 8,000 Baht

approved from Mr.Chokchai with interest 9% p.a. When it was due on 7 June 25x1, Mr.Chokchai cannot

pay to the business; therefore business went to report the police for a note of protest on 8 June 25x1 and

paid 100 Baht for a note of protest fee. Then on 19 June 25x1, Mr.Chokchai paid a debts plus a note of

protest fee and an overdue interest of 5% p.a.

General Journal Page 1

Date Transactions A/C Debit Credit
No.

25x1 8,000 -
Apr 8 Note Receivable
8,000 -
Account Receivable - Chokchai
Received 60-day bill of exchange,9% p.a.

Jun 7 Account Receivable - Chokchai 8,118 36
Notes Receivable
Interest Income (8,000 x 9% x 60/365) 8,000 -
118 36
Dishonored note receivable.

8 Account Receivable - Chokchai 100 -
Cash
100 -
Paid for a note of protest fee.

19 Cash 8,231 71
Account Receivable - Chokchai
Interest Income (8,118.36 x 5% x 12/365) 8,218 36
13 35
Payment as face value and interest received from
Mr.Chokchai.

Accounting for Bill BUNYAWEE SUWANNABOOL

Dishonored Discounted Note Receivable

Dishonored discounted note receivable means a note receivable that business sold as a discounted
note to the bank before it reaches the maturity date; however when reaching the maturity date, drawee
cannot pay to the bank.

In accounting, when drawee cannot pay the bank, the bank can request the business that sold
discounted note, to pay. For business’s accounting record, the business that sold discounted note will
cancel that note receivable and have the drawee to again, be its debtor with the principal plus the maturity
interest (if it is an interest bearing note) and plus fees on note of protest that the bank paid. Then it will
request drawee to pay debts of the amount that it paid to the bank with an overdue interest rate of 5% p.a.
or any rate that both parties agree by calculating from the total amount paid to the bank and the period of
time from the maturity date to the payment date.

Example 2 On 20 May 25x1, business received a 90 days bill of exchange worth 12,000 Baht
with an interest rate of 8% p.a. as a debt payment from Mr.Somchok. Then on 29 June 25x1, business sold
it to the bank as a discounted note. The bank discount is 10% p.a. When it was due on 18 August 25x1,
the bank cannot collect money from Mr.Somchok and paid 60 Baht for a note of protest fee and demand
the business to pay on behalf of Mr.Somchok on the date the note dishonored. Then on 2 September 25x1,
Mr.Somchok paid debts to the business plus an overdue interest of 6% p.a.

Accounting record on the debt payment from Mr.Somchok

General Journal A/C Debit Page 1
No.
Date Transactions 12,000 - Credit

25x1 12,000 -
May 20 Notes Receivable

Account Receivable - Somchok
Payment received from Mr.Somchok.

Accounting for Bill BUNYAWEE SUWANNABOOL