Insolvency of the Bill

 When a drawee become bankrupt is called Insolvency of a bill. In case of insolvency first pass dishonour entry.

Bad Debts:- An amount which is not recovered by the drawer from the drawee is called Bad debts. It is a loss to the drawer and profit to the drawee (Deficiency).

Insolvency of the Bill

Note:- First pass Dishonour Entry

In the Books of Drawer	In the Books of Drawee
Cash/Bank A/c Dr Bad debts A/c Dr            To Drawee A/c	Drawer A/c Dr             To Cash/Bank A/c             To Deficiency A/c