What is Bill Receivable (B/R)?

Bill Receivable: It is a bill of exchange which is written by creditor and accepted by the debtor. It states that the debtor owed certain amount for receiving the services or goods provide by creditor and the debtor must pay that amount on specified date mention on the bill. The bill receivable acts as asset for the company who sell the goods on credit to debtor (customer) because company receives the price of goods or services from customer (debtor). It is also known as accounts receivable.

Uses of Bill Receivable:

·         Bill discounting: If there is an immediate cash requirement in a company in that case bills are discounted in bank. It means bills are presented in banks to pay the amount of the bill before the time of maturity. The bank will pay the amount of bill after deducting their fees for rendering the services to the company. So, that’s why it is known as bill discounting.

·         Security: With the help of it company can raise a loan by giving a bill as a security. If the company is not able to pay the bill at the time of maturity then in that case the amount received on bill is kept by the lender at the time of its maturity.

Trade discount and Cash discount: The discount allowed by seller on selling the goods is known as trade discount. There is no journal entry for trade discount. The discount allowed by seller for immediate cash payment of goods by customer is known as cash discount. The cash discount a/c debited whenever it is allowed to customers.

Difference between Bills Receivable and Bills Payable:

Point of difference	Bill Receivable	Bills Payable
Purpose	It is a bill drawn when goods sold on credit.	It is a bill drawn when goods or services received on credit.
Amount receivable/ payable	Company receives the amount from debtor (customer).	Company has to pay an amount to creditor (supplier).
Asset / Liability	It is an asset for the company.	It is a liability for the company.

Credit Policy:

There are two types of Credit policy:

·         Liberal credit policy: In this credit policy goods are sold on credit to anyone without checking his credit worthiness. It means the customer is able or not to pay the goods value. It increases the sales volume but on other side it increases the chances of bad debt.

·         Restrictive credit policy: In this credit policy goods are sold only those customers who are able to pay the goods value later. It means the company checks the credit worthiness of the customers before selling goods on credit. It decreases the sales volume but on other side it decreases the chances of bad debt.

Factor affecting on credit policy:

·         Percentage of cash and credit sales: First of all decides how much percentage of cash and credit is to be done? For example company decides 80% of goods are sold on cash and 20% on credit. The total sales are 20, 000. So, company sold 16, 000 units in cash and 4, 000 units in credit.

·         Time period: The Company decides the credit period in which the customers have to pay the value of goods or services to the company.

·         Credit rating: The Company decides whom it allowed to sell goods on credit or whom it denied. It is done with the help of credit rating which is decided after evaluating the financial position of the customers.