The effect of this transaction is that we have received a new note for $100.50, and we debit bills receivable. This new note pays an older one which goes out of our possession, so we credit bills receivable. The amount of the new note includes the interest on the old, and we credit interest. We might have gone about this in a roundabout way by making these entries: _To cancel the old note:_ Samuel Smart $100.50 Bills Receivable $100.00 Interest, and Discount .50 Note due Oct. 10th. _To enter the new note:_ Bills Receivable $100.50 Samuel Smart $100.50 New note 30 days to take up note due Oct. 10th. These entries would leave the accounts in exactly the same condition as our first entry, and would serve no useful purpose. This is given as an illustration of how several entries may be made when the transaction could be as clearly explained in one. =95. When Renewed Note Has Been Discounted.= If the note which Samuel Smart has renewed has been discounted at the bank, we must reimburse the bank in some manner before we can obtain possession of the original note. The most simple way to handle this transaction will be to give the bank our check to pay the note. The entry is: Bills Discounted $100.00 Interest and Discount .50 To Bank $100.50 Gave check to take up Samuel Smart's note. We shall then treat the new note as previously explained. If, after getting it recorded on the books, we wish to discount this note, the entries will be exactly the same as when we discounted the original note. =96. When We Give or Pay a Note.= When we give our note, the effect of the transaction is just the opposite of the receipt of a note. Instead of adding to one class of our resources we are increasing one class of our liabilities, in return for which we either receive something of value or reduce our liabilities of another class. When we give our note in payment of a loan, we receive cash; if we buy goods and give a note in payment, we receive merchandise; if we give a note in payment of an account, we simply reduce our liabilities of one class and add to those of another. The entries necessary to properly record transactions involving notes given or bills payable, are not so complex as is the case with transactions involving bills receivable. The following illustrations cover transactions likely to arise in the average business: We give our note for $100.00 payable in 30 days, without interest, to Western Grocer Co. in settlement of an account. The entry is: Western Grocer Co. $100.00 Bills Payable $100.00 Note 30 days without interest When we pay the note the entry is: Bills Payable $100.00 Bank $100.00 Check to Western Grocer Co. to pay note due Oct. 10.