6. Dishonour of Bill

Dishonour of a Bill
When the drawee fails to make the payment on the date of maturity then it is known as Dishonour of a Bill. In this situation, liability of the acceptor is restored. Therefore, the entries made on the receipt of the bill should be reversed.

Noting Charges
A bill of exchange should be duly presented for payment on the date of its maturity. The drawee is absolved of his liability if the bill is not duly presented. Proper presentation of the bill means that it should be presented on the date of maturity to the acceptor during business working hours. To establish beyond doubt that the bill was dishonoured, despite its due presentation, it may preferably to be got noted by Notary Public.  Noting authenticates the fact of dishonour.  For providing this service, a fees is charged by the Notary Public which is called Noting Charges.

The following facts are generally noted by the Notary:

• Date, fact and reasons of dishonor.
• If the bill is not expressly dishonored, the reasons why he treats it as dishonored.
• The amount of noting charges.

The entries recorded for noting charges in the drawers book are as follows:

When Drawer himself pays
Drawee's A/c          Dr.         To Cash A/c

Where endorsee pays
Drawee's A/c          Dr.          To Endorsee A/c

When the bank pays on discounted bill
Drawee's  A/c        Dr.           To Bank A/c

When the bank pays in the event of sending the bill for collection to the bank
Drawee's  A/c        Dr.           To Bank A/c

Note - whosoever pays the noting charges, ultimately these have to be borne by the drawee. That is why the drawee is invariably debited in the drawer's books. This is because he is responsible for the dishonour of the bill and, hence, he has to bear these expenses.
For recording the noting charges in his book the drawee opens Noting Charges Acccount. He debits the Noting Charges Account and credits the Drawer's Account.