ch-14 Flashcards
Define bill of exchange
It is a written instrument directing a person to pay the amount specified in the bill
Define drawer
Drawer is a person who draws the bill
Define drawee
It is a person who is directed by the drawer to pay and who gives acceptance
Define payee
It is a person to whom drawee makes the payment
Define tradebill
It is the bill drawn and accepted for a business transaction
Define accommodation bill
It is the bill drawn and accepted for mutual help
Define promissory note
It is an instrument in writing being an undertaking by the maker to pay certain sum of money
Define maker
It is a person who makes the promissory note
Define discounting of a bill
It means taking the amount form the bank before maturity
Define honouring the bill
It means meeting the obligation to pay
Define dishonour of a bill
It means not meeting the obligation to pay
Define noting of a bill
It is a process through which the bill is presented for payment through a notary public.
Define noting charges
Charges paid to the notary public on the dishonour of a bill to record the facts of dishonour
Define days of grace
Days added to the date of maturity
Define endorsing the bill
Transferring the bill to another person by the holder
What are the features of a bill
- It is a written order
- It is drawn and signed by the maker
- It is an unconditional order to a person
- The specified amount is payable to the person named in the bill
- It specifies the date by which the amount is to be paid
- It is accepted by the drawee
State the parties of bill of exchange
- Drawer
- Drawee
- Payee
State the types of bill of exchange
- Trade bill
2. Accommodation bill
What are the advantages of bill of exchange
- Purchase and sale of goods on credit
- Discounting facility
- Easy to recover the amount
- Endorsement
- Certainty as to payment
- No remainder to debtor
- Convenient mean of trade remittance
- Valid evidence of debt
What are the features of promissory note
- It is an unconditional written undertaking to pay the specified amount
- It is drawn and signed by the maker
- It specifies the name of the payee
- Specified amount is payable to the specified person
- Date of payment is specified
Who are the parties to a promissory note.
- Maker
2. Payee
