Renewal of bill occurs when dishonored bill is agreed to be replaced by a new bill before or after maturity. When original bill is dishonored and renewed: Original bill is cancelled from accounts by reversing the entry. New bill is created for amount including: Original bill amount + Interest (calculated for extended period) + Noting charges + Protesting charges. Journal entry: Debit Debtor Account (for additional charges), Debit Bills Receivable (for new bill amount), Credit Bills Receivable (for old bill amount), Credit Interest/Finance Charges. The difference in amounts is recorded as interest income and recovery of charges. When renewal occurs before original maturity: Interest is calculated for the extended period. New bill replaces original bill in Bills Receivable account. The debtor's position changes from bill holder to new bill holder. Documentation includes canceling original bill, recording new bill, and noting reasons for renewal. Renewal creates opportunity to strengthen security by adding interest and charges. If bill is renewed multiple times, each renewal is accounted for separately with appropriate interest calculations. Exam tip: Practice calculating total amount of renewed bill with all components; understand when renewal occurs before vs after maturity; show clear working of interest calculation.