Bills payable journal

Definition and explanation

The bills payable journal (or the bills payable book) is a special journal that businesses use to record all the bills (i.e., acceptances) given to their creditors.

Instead of making payments in cash, businesses sometimes pay by means of accepting bills of exchange drawn on them by their creditors. The acceptances given to creditors can be recorded in the general journal if the transactions are few. However, if these transactions frequently occur, then it is advisable to maintain a bills payable journal to record them. Similarly, all acceptances received from debtors can be conveniently recorded in a bills receivable journal.

Each time a bill of exchange is accepted by the business, an entry is made in the bills payable journal. This journal, therefore, reveals the number as well as the amounts of the bills of exchange drawn on and accepted by the business during a particular period of time. The periodic total of the amount column of this book is credited to the bills payable account in the journal ledger. In the subsidiary ledger of creditors, accounts of individual creditors to whom the acceptances have been given are debited with the amounts shown against their names.

Format of a bills payable journal

A ten column format of the bills payable journal or book is given below:

Students should note that the bills payable journal records a transaction only when an acceptance is given to a creditor. The entries relating to the renewal and dishonor of a bill are not recorded in this journal; rather, these entries are recorded in the general journal.