Question

Preparation of report on various treatments of bills of exchange (trade bill)12th project

Answer 1

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Answer 2

Bill of exchange refers to a written interest that doesnot bear any interest. It has been defined as an unconditional order in writing addressed by one person to another which include 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 certain sum in money to or to the order of a specified.

There are three parties, they are- the drawer, the drawee and the payee.

• Drawer is the person who draws the bill.
• Drawee is the party upon whom the bill is drawn.
• Payee is the party whose favor the bill is drawn.

The main functions of bill of exchange include:

1. A bill of exchange provides the granting of trade credit in a lawful format by allowing payments on agreed prospective dates.
2. Facilitates formal evidence of the claim for payment from a seller to a buyer.
3. Facilitates the seller with access to finance by allowing them to transfer their debts to a bank or financer by simply endorsing the bill of exchange to that bank or financer.
4. Allows the financer or the banker to retain a convincing legal claim on the buyer as well as the seller.

Advantages:

1. It is a legal evidence of debt.
2. It is a convenient method for the transfer of debt.
3. A creditor can sue on the bill itself.
4. It is a neglotiable instrument and can be transferred for settlement of one's debt without difficulty.
5. It is an easy mens of transmitting money from one place to another.