Bills Receivable$10.00
Interest added to Smart's note not paid when due
Bills Discounted$2,000.00
Bank $2,010.00
Smart's note not paid at maturity.

93. When a Note is Past Due. The above entries leave this unpaid item in the bills receivable account. If the business is one in which a large number of bills are discounted, it will be advantageous to show past due bills receivable by themselves, leaving bills receivable account to represent only paper not due. The entry for a bill unpaid at maturity would be:

Bills Receivable Past Due$2,010.00
Bills Receivable $2,010.00
Smart's note past due.

94. When a Note is Renewed. We shall now suppose that Samuel Smart finds that he will be unable to pay his note when due. He comes to us and offers a new note for 30 days, which we accept. He prefers to add the interest due on the original note to the principal, and makes his note for $100.50. We then return the original note and the entry is:

Bills Receivable$100.50
Interest and Discount .50
Bills Receivable$100.00
New note given by Samuel Smart to cover note due Oct. 10, with interest.

The effect of this transaction is that we have received a new note for $100.50, and we debit bills receivable. This new note pays an older one which goes out of our possession, so we credit bills receivable. The amount of the new note includes the interest on the old, and we credit interest.

We might have gone about this in a roundabout way by making these entries:

To cancel the old note:
Samuel Smart$100.50
Bills Receivable $100.00
Interest, and Discount.50
Note due Oct. 10th.
To enter the new note:
Bills Receivable$100.50
Samuel Smart $100.50
New note 30 days to take up note due Oct. 10th.

These entries would leave the accounts in exactly the same condition as our first entry, and would serve no useful purpose. This is given as an illustration of how several entries may be made when the transaction could be as clearly explained in one.