bill of exchange act pdf

characteristics of a bill of exchange and characteristics of negotiable instrument
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Published Date:25-07-2017
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Bills of Exchange and Promissory Notes-Part 1/6 CPT Section A Fundamentals of Accountancy Chapter 7 Unit 3 CA. Ajay Lunawat Learning Objectives Meaning of Bills of Exchange & Promissory Notes Accounting in the books of Drawer and Drawee Accomodation Bills Insolvency and Retirement Bills of Exchange A Man goes for shopping 3 Options After Shopping • Pay By Cash 1 • Pay By Card 2 • Ask for Credit 3 Option 3 : Ask for Credit – Scenario 1 In this document, you Ok, Y but our I w tot ilal l m bi ak ll e a Can By ut ou ex I am tend m not e shall agree to pay me docam umount ent w is hi R ch s.y ou Sure, I am ready carry cirng c edit ash the amount after 30 need t 10, o ac 000c ept days from today This Document is called BILL OF EXCHANGE What is Bills of Exchange Instrument In Writing Containing an unconditional order Signed by the MAKER Directing a Certain Person To Pay A Certain sum of money Points to be noted A Bill of Exchange must be in writing. It must be dated. It must contain an order to pay a certain sum of money. The money must be payable to a definite person or to his order to the bearer. The draft must be accepted for payment by the party to whom the order is made. Parties to Bill of Exchange DRAWEE DRAWER The party who The party who accepts the order draws the bill PAYEE : The Party to whom the payment is to be made. Drawer and Payee may be the same PROMISSORY NOTE Option 3 : Ask for Credit – Scenario 2 But I am ready to Please find this Your total bill But I am not Ok, then I have no give you a document, where I amount is Rs. carrying cash Thanks problem Promissory Note promise you to pay Rs. 10,000 10,000 after 30 days This Document is called PROMISSORY NOTE What is Promissory Note A promissory note is an instrument in writing, Not being a bank note or currency note Containing an unconditional undertaking Signed by the maker To pay a certain sum of money Only to or to the order of a certain person. Characteristics of Promissory Notes It must be in writing. It must contain a clear promise to pay. The promise to pay must be unconditional The promiser or maker must sign the promissory note. Characteristics of Promissory Notes The maker must be a certain person. The payee must also be certain. The sum payable must be certain. Payment must be in legal currency of the country. It should not be made payable to the bearer. It should be properly stamped.. Basic Questions Bills of Exchange & Promissory Notes Question 1 A sold goods to B for Rs. 20,000. A will grant 5% discount to B. B requested A to draw a bill. The amount of the bill will be: a) Rs.20,000 b) Rs. 19,000 c) Rs. 19,200 d) Nil Answer (b) Question 2 From the following information, find out who can draw the bill if Mr A sold goods to B: a) A will draw a bill on B b) B will draw a bill on A c) Third party will draw a bill on A d) None of these Answer (a) Question 3 Which of the following statement is false: a) B/R is a negotiable instrument b) B/R must be accepted by drawee. c) There can be three parties in respect of bills of exchange – drawer, drawee & payee d) Oral bill of exchange is also valid. Answer (d) Question No 4 Which of the following instrument is not a negotiable instrument: (a) Bearer cheque (b) Promissory note (c) Bill of exchange (d) Account Payee Crossed Cheque Answer (d) Question No 5 The promissory note should be signed by: (a) Drawer (b) Drawee (c) Payee (d) Promiser Answer (d)

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