Bills Receivable Discounted and Dishonoured
Sometimes the bills receivable discounted with the bank is dishonoured by the drawee. In such a case, the amount of bill has to be paid to the bank. If the account is maintained with the same bank, bank may debit the account of customer instead of receiving payment. Auditor should obtain a schedule of bills discounted dishonoured and examine the same. He should verify dishonor of bills discounted from bank’s advice. The bank also returns the bill. The payment side of the cash book can be checked for the dishonor of such bill with bank’s advice and amount of bill plus any charges incurred thereon. The auditor should verify entries for dishonour passed in the parties account. He should confirm whether bank charges, noting charges etc. have been debited to concerned customers account.
(1) Bank advice, (2) Dishonoured bill, and (3) Pass book.