Quick Answer: What Is Bill Of Exchange And Its Types?

What is Bill of Exchange with example?

Bill of exchange means a bill drawn by a person directing another person to pay the specified sum of money to another person.

For example, X orders Y to pay ₹ 50,000 for 90 days after date and Y accepts this order by signing his name, then it will be a bill of exchange..

Is Cheque a bill of exchange?

1. A cheque is always drawn on a banker, while a bill of exchange may be drawn on any one, including a banker. 2. A cheque can only be drawn payable on demand; a bill of exchange may be drawn payable on demand, or on the expiry of a certain period after date or sight.

How do you write a bill of exchange?

A bill of exchange normally includes the following information:Title. The term “bill of exchange” is noted on the face of the document.Amount. The amount to be paid, expressed both numerically and written in text.As of. The date on which the amount is to be paid. … Payee. … Identification number. … Signature.

What is the difference between bill of exchange and letter of credit?

A bill of exchange is generally used in international trade ac- tivities where one party will pay a fixed amount of funds to another party at a predetermined date in the future. The main difference between the two is that a letter of credit is a payment mechanism whereas a bill of exchange is a payment instrument.

What are the disadvantages of bill of exchange?

Disadvantages of bill of exchange:The bills of exchange are mainly used for short term service. … In case the bills of exchange are accepted by the bank, then it is an additional burden on the person who was drawn it.The discount allowed in the bills of exchange is also like an additional cost.More items…•

Who keeps the bill of exchange?

(1) Drawer is the 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. The drawer after writing the bill of exchange has to sign it as maker of the bill of exchange.

Why is a bill of exchange unconditional?

An unconditional order in writing, addressed by one person (the drawer) to another (the drawee), signed by the drawer, requiring the drawee to pay on demand, or at a fixed or determinable future time, a sum certain in money to, or to the order of, a specified person (the payee), or to bearer (section 3, Bills of …

How many types of bill of exchange are there?

two typesFrom the accounting point of view, Bills of exchange are of two types: Trade bill: Where the bill of exchange is drawn and accepted to settle a trade transaction, it is called Trade bill. This bill of exchange is drawn by the seller of the goods and is accepted by the buyer.

What are the advantages and features of a bill of exchange?

The first advantage of the bill of exchange is that it fixes the date on which the payment is to be made. Therefore; the person who is to collect the payment knows exactly when the money is expected, and the borrower knows when he is required to make the payment.

What is Bill entry?

A bill of entry is a legal document that is filed by importers or customs clearance agents on or before the arrival of imported goods. It’s submitted to the Customs department as a part of the customs clearance procedure. … The bill of entry can be issued for either home consumption or bond clearance.

What is Bill of Exchange and its essentials?

According to the Indian Negotiable Instruments Act of 1881, under section 5, “A Bill of Exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.”

What is the difference between bill of exchange and promissory note?

A bill of exchange is an unconditional written order made by the drawer on drawee to receive the specified sum within the mentioned period. Whereas, a promissory note is a written promise made by the borrower or drawer to repay the amount on a specific date or order of the payee.

What is discounting of bill of exchange?

Discount of trade bills is short-term financing granted by the Bank. The Bank purchases trade bill before its payment term at a price less the amount of discount interest. … After repayment of the bill by counterparty, the available limit is released.

What is Bill of Exchange in simple terms?

A bill of exchange is a written order used primarily in international trade that binds one party to pay a fixed sum of money to another party on demand or at a predetermined date.

What are the important function of bill of exchange?

A bill of exchange is generally used in international trade and aims at binding one party to pay a fixed amount of money to another party at a predestined future date. As explained by Investopedia, bills of exchange are just like checks and promissory notes.

What is a bill of exchange in banking law?

6. (1) A bill of exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand, or at a fixed or determinable future time, a sum certain in money to or to the order of a specified person, or to bearer.

What are the advantages of negotiable instruments?

Easily Transferable: A negotiable instrument is easily and freely transferable. There are no formalities or much paperwork involved in such a transfer. The ownership of an instrument can transfer simply by delivery or by a valid endorsement. Must be in Writing: All negotiable instruments must be in writing.