Retiring a Bill of Exchange Under Rebate

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on February 27, 2023

Retiring a Bill of Exchange: Definition

When a drawee withdraws a bill of exchange from circulation by paying the amount of the bill before its maturity, this is known as retiring a bill of exchange.

Retiring a Bill of Exchange: Explanation

From the drawee's perspective, the drawee either pays or dishonors the bill on the due date. However, there is another option available to the drawee, which is known as retiring the bill of exchange.

When drawee makes the payment of the bill before maturity, the drawer allows some discount to the drawee, which is known as a rebate.

Rebate: Definition and Explanation

A rebate is a concession or discount allowed by the holder of the bill to the drawee in return for paying the amount of the bill before maturity. It is an expense for the holder and an item of revenue for the drawee.

From the holder's point of view, a rebate is considered a discount allowed, whereas it is a discount received from the drawee's perspective.


On 1 January 2019, X sold goods to Y for $20,000 on credit. On the same date, X drew a bill payable after four months on Y. The bill was accepted by Y and returned to X.

After two months, Y wanted to pay the bill. X agreed and Y paid the bill under a rebate of 12% p.a.

Required: Make journal entries in the books of X and Y.

Journal Entries for X


Amount of Rebate Calculation

Journal Entries for Y

Retiring a Bill of Exchange Under Rebate FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.