According to Sec. 5 of negotiable instrument act 1881, “ A bill of exchange is an instrument in writing containing an unconditional order signed by the maker directing to 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”.
Advantages of Bills of Exchange.
- Source of finance.
- Debt discharge instrument.
- Evidence of indebtedness.
- Means of remittance.
Difference between Bill of Exchange and Promissory Notes.
Points to remember
- Usually the term of the bill does not exceed 90 days from the date of the bill with a grace period of 3 days.
- When the due date is the holiday the preceding date will be the due date.
- Bill at sight means the instrument in which no time for payment is mentioned.
- Promissory notes or cheques can be dishonored by non-payment only.
- Noting is the recording of a fact of dishonor by a notary public.
- Accommodation Bills refers to those bills which can be drawn, accepted or endorsed without any consideration.
- Rebate on the retirement of a bill is an income for the drawee and is an expense for the payee.
- In case of renewal of bill, interest for the extended period is either paid in cash or is included in the amount of new bill.