Retiring a bill means paying it off before maturity, possibly with a discount for early payment. When bill is retired before maturity: Debit Bills Receivable (for full amount), Credit Cash/Bank (amount paid), Credit Discount Allowed (for discount amount). Discount Allowed is the interest saved by the debtor by paying early. Discount Allowed is deducted from interest income or shown as expense depending on accounting policy. Journal entry treatment: Debit Bills Receivable, Credit Bank Account (amount paid), Credit Discount Allowed/Interest Received. Discount is calculated based on time period remaining to maturity and agreed discount rate. When drawer retires the bill: Drawer records it as settlement of debt, recording any discount gained. Documentation includes noting on the bill the date and amount of payment, preserving evidence of retirement. Retirement before maturity is advantageous to debtor who gets discount; it's advantageous to creditor who gets liquidity and eliminates credit risk. Early retirement reduces contingent liability for drawer and endorsers. No further liability after retirement as bill is settled completely. If bill is partially retired, only the paid amount is removed from Bills Receivable account. Retirement entry should show clearly the date, amount, and discount components. Exam tip: Practice calculating discount for various periods; understand the difference between retirement and renewal; show clear entries distinguishing discount and amount paid.