When a bill is drawn by A on B, and before the maturity date, B becomes insolvent then in the books of A it is debited to _____________.

Bills Receivable Account

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Bank Account

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B's Account

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Bank for Collection of Bills

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Solution

The correct option is B B's Account
Insolvent is the person whose assets are not sufficient to pay off his liabilities in full.
In case of insolvency of the acceptor, the holder would get the proportionate amount of what is due from the bill.
The journal entry for the transaction should be :-
B's A/c Dr.
To Bills receivables A/c

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