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    Bill of Exchange

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    Suraj Handa
    A bill of exchange is an unconditional order in writing to pay a certain sum of money to a person named therein on a specified date. It requires acceptance by the drawee. A promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay a certain sum of money to the payee. Bills can be discounted with a bank before the maturity date. Endorsement involves signing and transferring the bill to another party. Dishonor occurs when payment is not made on the maturity date.

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    Bill of Exchange

    Uploaded by

    Suraj Handa
    148 views2 pages
    A bill of exchange is an unconditional order in writing to pay a certain sum of money to a person named therein on a specified date. It requires acceptance by the drawee. A promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay a certain sum of money to the payee. Bills can be discounted with a bank before the maturity date. Endorsement involves signing and transferring the bill to another party. Dishonor occurs when payment is not made on the maturity date.

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    Accounting notes By sunil garnayak

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    A bill of exchange is an unconditional order in writing to pay a certain sum of money to a person named therein on a specified date. It requires acceptance by the drawee. A promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay a certain sum of money to the payee. Bills can be discounted with a bank before the maturity date. Endorsement involves signing and transferring the bill to another party. Dishonor occurs when payment is not made on the maturity date.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    148 views2 pages

    Bill of Exchange

    Uploaded by

    Suraj Handa
    A bill of exchange is an unconditional order in writing to pay a certain sum of money to a person named therein on a specified date. It requires acceptance by the drawee. A promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay a certain sum of money to the payee. Bills can be discounted with a bank before the maturity date. Endorsement involves signing and transferring the bill to another party. Dishonor occurs when payment is not made on the maturity date.

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    Bill of Exchange

     According to Indian Negotiable instrument Act 1881;


     Bill of Exchange:-
     Unconditional order to pay certain amount on an agreed date
     Generally drawn by the creditor upon his debtor.
     It is just a draft till its acceptance is made by the Drawee.
     Drawer: -
    Maker of the Bill of Exchange. A Seller/Creditor who is entitled to receive money from
    the debtor can draw a bill of exchange upon the buyer/debtor.
    Drawee: -
    Person upon whom the bill of exchange is drawn. It’s the purchaser or debtor of goods.
    Payee: -
    Person to whom the payment is to be made. Generally same as Drawer.
     Promissory Note:-
     Unconditional promise to pay a certain sum of money on a certain date.
     It does not require any acceptance because the maker promises to pay.
     Payable to bearer is illegal.
     Maker/Drawer/Promiser:-
    Who makes the promissory note to pay a certain amount as specified in the note.
    Drawee/Payee/Promisee:-
    A person in whose favour the promissory note is drawn.

    Maturity of Bill:-

     The date on which a bill of exchange or a promissory note becomes due for payment
     In arriving the maturity date three days known as days of grace
    Example:- Bill dated – March 5
    Payable-- 30 days after
    Falls due on – April 7
    Maturity date—April 8 (If this is on holiday, maturity day becomes the preceding day)
    (If emergent holiday, maturity day becomes the following day )

    Discounting of Bill:-

     The process of encashing the bill with the bank is called discounting the bill.
     The bank deducts some charges from the Drawee on the due date.

    Endorsement of Bill:-

     The act of signing and transferring the bill is called endorsement.


     The drawer signs at the back of the bill along with the name to whom it is being transferred.

    Dishonoring of a Bill:-

     When the drawee fails to make the payment on the date of maturity.
     In this situation liability of the acceptor is restored.
     So the entries made on the receipt of the bill should be reversed.
    Renewal of the Bill:-
     Drawee requests the Drawer to extend the time for payment.
     Old bill is cancelled and anew bill is made. This is called so.
     Noting of bill is not required., since it’s a mutual agreement.

    Retiring of the Bill:-


     If the drawee makes the payment before maturity, the bill said to be retired.
     Some rebate is given to drawee.

    Accommodation Bill:-
     An acceptance is made to settle a trade debt owing to the drawer by the drawee in case of a bill of
    exchange and the bill is called a trade bill.
     Promising notes can also be used to raise temporary funds. This is called accommodation bill.
    Drawee is called accommodating party. And drawer is called accommodation party.

    Bills Receivable Book & Bills payable Book:-


     These subsidiary books record only the transactions related to drawing & acceptance of bills.
     It does not record bills discount, endorsement, retirement, renewal. These are done in journal.
     Honouring of bill appear in Cash Book.

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