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Bill of Exchange: All you need to know about
A bill of exchange is a written order binding one party to pay a fixed sum of money to another party on demand or at a predetermined date.
1-2 Questions about the Banking and financial Instrument in India like Bill of exchange are asked in the government exam in the General Awareness section. Here we are providing the complete information regarding the Bill of exchange .
Bill of exchange related Complete Information will be very helpful in the General awareness section in different competitive exams like Bank, SSC, Railways, etc.
What is Bill of Exchange?
- According to the Negotiable Instruments Act 1881, a bill of exchange is defined as “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”.
Features of Bill of Exchange
- It is important to have a bill of exchange in writing
- It must contain a confirm order to make a payment and not just the request
- The order should not have any condition
- The bill of exchange amount should be definite
- Fixed date for the amount to be paid
- The bill must be signed by both the drawee and the drawer
- The amount stated on the bill should be paid on-demand or on the expiry of a fixed time
- The amount is paid to the beneficiary of the bill, specific person, or against a definite order
Types of Bill of Exchange
- Documentary Bill– In this, the bill of exchange is supported by the relevant documents that confirm the genuineness of sale or transaction that took place between the seller and buyer.
- Demand Bill– This bill is payable when it demanded. The bill does not have a fixed date of payment, therefore, the bill has to be cleared whenever presented.
- Usance Bill- It is a time-bound bill which means the payment has to be made within the given time period and time.
- Inland Bill- An Inland bill is payable only in one country and not in any other foreign country. This bill is opposite to the foreign bill.
- Clean Bill- This bill does not have any proof of a document, so the interest is comparatively higher than the other bills.
- Foreign Bill- A bill that can be paid outside India is termed as a foreign bill. Two examples of a foreign bill are an export bill and import bill.
- Accommodation Bill- A bill that is sponsored, drawn, accepted without any condition is known as an accommodation bill.
- Trade Bill- This kind of bill is specially related only to trade.
- Supply Bill- The bill that is withdrawn by the supplier or contractor from the government department is known as the supply bill.
Advantages of Bill of Exchange
- Legal Document- It is a legal document, and if the drawee fails to make the payment, it will be easier for the drawer to recover the amount legally.
- Discounting Facility- In cases where the drawer is in immediate need of money, the bill can be converted into cash by discounting it from a bank by paying some nominal charges.
- Endorsement Possible- This bill of exchange can be exchanged from one individual to another for the adjustment of the debt.
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