=27. Bills Receivable and Bills Payable.= The commercial term for promissory notes accepted by us is _Bills Receivable_. The commercial term for promissory notes given by us is _Bills Payable_. The term "bill" is used in this connection for the reason that a promissory note is a negotiable instrument, and when indorsed it becomes practically a bill of exchange. The accounts in the ledger which represent notes receivable and notes payable are called _Bills Receivable Account_ and _Bills Payable Account_.
The bills receivable account is debited when a note is received, and credited when a note is paid. The balance of bills receivable account shows the amount of unpaid notes payable to us.
The bills payable account is credited when we give a note and debited when we pay a note. The balance of bills payable account shows the amount of the notes that we owe.
=28. Bill Book.= For the purpose of keeping a record of bills receivable and bills payable, a book known as a _bill book_ is used. Any draft, note, due bill, or other written promise to pay a specified sum at a stated time, should be treated as a note or bill--receivable or payable, as the case may be. The bill book is an auxiliary book, and the record kept is usually treated as a memorandum only, records of each transaction being made in the journal. The form shown (p. 45) is one in common use.
=29. Acceptances.= A draft when accepted--that is, when it becomes an _acceptance_--has the same value as a promissory note, for it is a definite promise to pay on a specified date. Drafts are used for the collection of accounts in other cities than the one in which the creditor's place of business is located. A draft may call for payment a certain number of days after date, or it may call for payment at sight. The former is known as a _time draft_, while the latter is a _sight draft_.
=30. Discount and Exchange.= When a promissory note is taken to the bank for the purpose of raising money, it is customary for the banks to calculate the interest for the time the note is to run, and to deduct this from the principal, giving the borrower the net amount only. In other words, the interest is paid in advance, and such advance payment of interest is called _discount_.