| Bert V. Robbins | 125.75 | |
| Notes Payable | 125.75 | |
| Accepted Robbins’ draft
at 60 days’ sight, favor of J. S. Jackson & Co. |
This entry cancels Perkins’ liability on open account to Robbins, and shows as a substitution therefor the amount of his acceptance in favor of Jackson & Co. at Robbins’ request.
3. On the books of Robbins, the drawer:
| James Stanley Jackson & Co. | 125.75 | |
| George S. Perkins | 125.75 | |
| To record
the cancellation of our liability to Jackson & Co. on open account, and to credit Perkins with his acceptance of our draft on him at 60 days’ sight. |
From the point of view of Bert V. Robbins, the acceptance by Perkins means two things: (1) the cancellation of a part of Robbins’ claim against Perkins, and for this reason Robbins credits Perkins with $125.75; (2) the cancellation of Robbins’ debt to Jackson & Co., hence Jackson & Co. is debited on Robbins’ books for $125.75.
It is important to note here that in case Perkins fails to pay the note at maturity, Robbins becomes liable to Jackson & Co. Robbins may therefore be considered the first indorser of the accepted draft. The discussion of the manner of booking Robbins’ liability contingent upon Perkins’ failure to pay is deferred to [Chapter XLIII].
Entries After Payment of the Draft.—Upon payment by Perkins, the following entries are made:
1. On Perkins’ books, a debit to Notes Payable and a credit to Cash.
2. On Jackson & Co.’s books, a debit to Cash and a credit to Notes Receivable.
Draft and Cash Compared as Instruments of Payment.—The following two diagrams may further illustrate the utility of the draft as an instrument of trade.