| 1. Definition of a Bill of exchange:
2. Parties to a Bill of exchange:
(i) Drawer – the party who draws the bill and signs it ( usually creditor)
(ii) Drawee – the party to whom the bill is addressed (usually debtor)
(iii) Payee – the party to whom the bill is expressed to be payable 3. When a drawee accepts the bill and signs he/she is known as the acceptor. The acceptor is primarily liable on a bill to the drawer so long as the drawer retains the bill. When the bill is negotiated and transferred to a payee, the drawer than become liable on the bill as well as the acceptor.
4. The bill of exchange after it is accepted is known as bill receivable to the drawer and bill payable to the acceptor 5. When a bill receivable is discounted, the bill is actually being sold to the discount house for cash. The difference between the amount stated in the bill and the cash received is known as discount. This discount is the consideration payable for obtaining the money in advance of maturity date. The discount house will then hold the bill until maturity when it will present it to the debtor for payment.
|Further Related terms used :
|Refer next article on Accounting & Example of Bill of Exchange|
- Accounting For Bills Of Exchange – Part 3: Bills Payable
- Accounting For Bills Of Exchange – Part 2: Bills Receivable
- Cash Management -“Investing Cash Surpluses
- Types Of Discounts And Accounting Treatment For Discount Allowed and Discount Received
- Section 169 Companies Act 1965-Profit & Loss Account, Balance Sheet & Directors' Report