Bills for Collection
Bills held by a bank for collection on behalf of its customers are to be shown as a footnote to the balance sheet.
These bills are generally hundies or bills of exchange accompanied by documents of title to goods. Frequently, no bills of exchange are actually drawn; the bank is asked to present invoices and documents of title with instructions to collect the amount thereof from the party in whose name the invoice has been made. The documents of title enclosed with the bills for collection are usually not assigned to the bank.
A bank may get bills for collection from –
(a) its customers, drawn on outstation parties; or
(b) its other branches or other outstation banks or parties, drawn on local parties.
On receipt of the bills drawn on outstation parties, the bank forwards them to its branch or other correspondent at the place where they are to be collected. Such bills are called Outward Bills for Collection.
Bills received by the bank from its outstation branches and agents, etc. for collections are called Inward Bills for Collection.
It may be noted that if a bill is received by one branch of the bank from a customer and sent by it to another branch of the bank for collection, the same bill will be shown as an Outward Bill at the first branch and as an Inward Bill at the other branch. In the consolidated balance sheet of the bank, however, all such bills should be shown only once. Therefore, Inward Bills for Collection are excluded from the balance sheet of each branch.