ch-14

Question 1

Define bill of exchange

Answer 1

It is a written instrument directing a person to pay the amount specified in the bill

Question 2

Define drawer

Answer 2

Drawer is a person who draws the bill

Question 3

Define drawee

Answer 3

It is a person who is directed by the drawer to pay and who gives acceptance

Question 4

Define payee

Answer 4

It is a person to whom drawee makes the payment

Question 5

Define tradebill

Answer 5

It is the bill drawn and accepted for a business transaction

Question 6

Define accommodation bill

Answer 6

It is the bill drawn and accepted for mutual help

Question 7

Define promissory note

Answer 7

It is an instrument in writing being an undertaking by the maker to pay certain sum of money

Question 8

Define maker

Answer 8

It is a person who makes the promissory note

Question 9

Define discounting of a bill

Answer 9

It means taking the amount form the bank before maturity

Question 10

Define honouring the bill

Answer 10

It means meeting the obligation to pay

Question 11

Define dishonour of a bill

Answer 11

It means not meeting the obligation to pay

Question 12

Define noting of a bill

Answer 12

It is a process through which the bill is presented for payment through a notary public.

Question 13

Define noting charges

Answer 13

Charges paid to the notary public on the dishonour of a bill to record the facts of dishonour

Question 14

Define days of grace

Answer 14

Days added to the date of maturity

Question 15

Define endorsing the bill

Answer 15

Transferring the bill to another person by the holder

Question 16

What are the features of a bill

Answer 16

1. It is a written order
2. It is drawn and signed by the maker
3. It is an unconditional order to a person
4. The specified amount is payable to the person named in the bill
5. It specifies the date by which the amount is to be paid
6. It is accepted by the drawee

Question 17

State the parties of bill of exchange

Answer 17

1. Drawer
2. Drawee
3. Payee

Question 18

State the types of bill of exchange

Answer 18

1. Trade bill

2. Accommodation bill

Question 19

What are the advantages of bill of exchange

Answer 19

1. Purchase and sale of goods on credit
2. Discounting facility
3. Easy to recover the amount
4. Endorsement
5. Certainty as to payment
6. No remainder to debtor
7. Convenient mean of trade remittance
8. Valid evidence of debt

Question 20

What are the features of promissory note

Answer 20

1. It is an unconditional written undertaking to pay the specified amount
2. It is drawn and signed by the maker
3. It specifies the name of the payee
4. Specified amount is payable to the specified person
5. Date of payment is specified

Question 21

Who are the parties to a promissory note.

Answer 21

1. Maker

2. Payee