10. Give the entry for each of the parties to a three-party sight draft. 11. What is the purpose of a two-party sight draft? 12. Explain how a two-party sight draft is collected. 13. Explain the straight bill of lading drawn in triplicate. 14. What is the object of an order bill of lading? How does it differ from a straight bill of lading? 15. Explain the necessary steps in making shipments by freight C. O. D. 16. Are bills of lading negotiable? 17. Explain the entry and the posting of C. O. D. sales. 18. How are shipments made by express C. O. D.? 19. How is the money usually returned? 20. Why is it best in a large business to keep several trading accounts instead of one merchandise account? 21. For what should the Purchases account be debited and credited? 22. For what should Freight In be debited and credited? 23. How should Freight In be closed? 24. How should Purchases be closed? 25. For what should the Sales account be debited and credited? 26. How should Sales be closed? 27. How should Merchandise Trading be closed? 28. For what should Delivery Expense be debited and credited? 29. For what should Real Estate be debited and credited? 30. For what should Real Estate Expense and Income be debited and credited? 31. Why should personal accounts with proprietors be kept? 32. For what should the partners' personal accounts be debited and credited? 33. How should a cash sale less a discount be entered? 34. What is the object of the bill book? 35. How do you prove the Notes Receivable Book? The Notes Payable Book? 36. What is a statement of account? How does it differ from an invoice? 37. To whom are statements of account sent? How often? 38. Why is a Merchandise Discount column kept on each side of the cash book? How is each Merchandise Discount column posted? 39. 40. What is the object of keeping an Expense column on the cash book? How is it posted? CHAPTER XXI TIME DRAFTS Personal Drafts may be made payable at some future date. They are then called time drafts. Time drafts may be payable: Time drafts may be used for many of the same purposes as sight drafts. They may be three-party or two-party drafts. The time draft payable after date is the more common of the two but is used much less. than sight drafts. The theory of time drafts is the same as that of sight drafts. The drawer owes the payee. The drawee owes the drawer. The drawer asks the drawee to pay the money at some future time instead of at once. D. E. Bailey draws this draft and sends it to the payee, N. C. Stout. Mr. Stout sends it to the drawee, M. I. Mason, to get his written consent to the draft. M. I. Mason gives his consent by accepting the draft. To Accept a Draft. The drawee accepts the draft by writing across the face of the draft, Accepted, with the date, and his signature. He may also make it payable at some bank if he desires. The draft is now called an acceptance. The act of accepting the draft has the same effect as the giving of a promissory note. The payee receives the acceptance the same as he would receive a promissory note. The entries for a three-party time draft are all made in the journal. The drawer, D. E. Bailey, makes the following entry when he draws the draft: 12 DRAWER'S ENTRY N.C. Stout Drew a 60-da. 750 and remitted it to N.C.S. on acck 750 The drawer then sends the draft to the payee, N. C. Stout. He makes no entry when he receives the draft, but sends it to the drawee, M. I. Mason for acceptance. The drawee accepts the draft and sends it to the payee, N. C. Stout. DRAWEE'S ENTRY D. E. Bailey Accepted his 750 on acct. 750 The payee makes the following entry when he receives the accepted draft: PAYEE'S ENTRY Notes Re Notes Receivable Recd. M. J. Masons 750 To D. E. Bailey acceptance of D.E.BS 60-da. draft 750 Three-party time drafts are also drawn, payable at a certain time after sight. If the time is sixty days, the draft may read, At sixty days' sight or Sixty days after sight. These expressions mean that the draft is payable sixty days after it has been accepted by the drawee. The date of maturity is, then, sixty days after the date of acceptance on the draft and not sixty days after the date on which the draft is drawn. Recording Drafts in the Bill Books. All time drafts must be recorded in the bill book. The details for this draft in the Notes Receivable Book of N. C. Stout are as follows: The record of When and how disposed of is not entered until the note is paid or otherwise disposed of. The details in the Notes Payable Book for the record of the drawee, M. I. Mason, are as follows: The record of When and how disposed of is not made until the note is paid. THE DRAWER'S ENTRY when he draws the draft is Payee to Drawee THE PAYEE'S ENTRY when he receives the accepted draft is Notes Receivable to Drawer THE DRAWEE'S ENTRY when he accepts a draft is Drawer to Notes Payable When a time draft is paid, the payee makes an entry in his cash book crediting Notes Receivable the same as if he had received cash for another's note. /2/1 N. C. STOUT'S CASH RECEIPTS Notes Receivable M.S. M's acceptance 750 The drawee of the draft makes the same entry that he would if he had paid his note. Payable at a Bank. To make a note or acceptance payable at the bank is equivalent to a written order on the bank to pay the amount of the draft and take it out of the acceptor's account. No check is necessary, as making the note or the acceptance Payable at National Exchange Bank may take the place of a check. A few days before the draft is due, the payee sends it to the drawee's bank, either through his bank or direct. At maturity most banks charge the draft at once to the drawee's account and send him the canceled draft and a Charge or Debit Slip. The Charge Slip is made out in duplicate, the original being turned over to the bookkeeper of depositors' accounts and the duplicate sent to the depositor. (See illustration of Charge Slip on page 182) Many banks prefer to notify their depositors by telephone or by mail before paying an acceptance or note payable at the bank. The depositor may instruct the bank to charge it to his account, or he may agree to send a check in payment. In your practice work both methods of paying will be illustrated. |