2. Robbins bought goods from James Stanley Jackson & Co. to the amount of $125.75 on account.
The problem will be discussed from the standpoint of Bert V. Robbins. From the above data it is clear that Robbins has a claim against Perkins for $175 and owes $125.75 to Jackson & Co. Instead of collecting the claim against the former and paying his debt to the latter, he writes out a draft for $125.75 on Perkins, with Jackson & Co. as payee, thereby requesting (or ordering) Perkins to pay $125.75 to Jackson & Co. This draft he sends to Jackson & Co. and they present it through their bankers to Perkins. Under ordinary circumstances Perkins acknowledges the correctness of the draft and writes his acceptance on the face of it, thereby promising to pay the amount when due. Acceptances are usually worded in the following manner:
Accepted, Oct. 6, 19—
Payable at First National Bank
of Providence
George S. Perkins
It should be said that the three-party draft is not usually made use of without the consent of the drawee previously obtained, as in the case of a bank check, which is a draft on the bank drawn by the depositor. Very often in ordinary drafts, particularly when drawn against an export of goods, the drawer makes out the draft in favor of himself and indorses it in blank, thus making it transferable to bearer.
The Accepted Draft.—When accepted, the draft becomes, to all intents and purposes, an ordinary promissory note—Perkins’ promise to pay Jackson & Co. $125.75. Until the draft is accepted by Perkins, it simply constitutes a request from Robbins to Perkins to pay the amount named and the draft as such does not bind Perkins in any way. Hence, no entry is made on the books of account of any of the three parties until acceptance. Of course, a memorandum is kept of all drafts drawn.
Illustrative Entries.—Upon acceptance by Perkins, the following entries are made:
1. On the books of Jackson & Co., the payee:
| Notes Receivable | 125.75 | |
| Bert V. Robbins | 125.75 | |
| Robbins’ draft on G. S. Perkins, accepted by Perkins, payable December 5. |
Perkins’ acceptance, in possession of Jackson & Co., constitutes a claim against Perkins, and Jackson & Co. therefore debit Notes Receivable. They credit Robbins because this draft was sent to them by Robbins in payment of Jackson’s open claim against Robbins for $125.75.
2. On the books of Perkins, the drawee: