What entry is made in the drawer's books when a bill discounted with the bank is dishonored?

Show Answers

The drawer debits the Acceptor’s AccountThe drawer credits the Bills Receivable AccountThe drawer debits the Bank AccountThe drawer debits the Bills Payable AccountNone of the above

Explanation

When a bill discounted with the bank is dishonored, the drawer reinstates the acceptor as a debtor by debiting the Acceptor’s Account and credits the Bank or Cash Account for the amount paid to the bank. The acceptor, on the other hand, debits the Bills Payable Account and noting charges, and credits the Drawer’s Account to restore the original creditor-debtor relationship. Therefore, the correct entry in the drawer's books is to debit the Acceptor’s Account, making option A correct while the others are incorrect.