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Fundamentals of Accounting - Bill of Exchange Video Lecture (CMA Foundation)


 Fundamentals of Accounting - Bill of Exchange (CMA Foundation)


About Bill of Exchange

The Negotiable Instruments Act 1881 governs the provisions for bills of exchange. According to Section 5 of this act, the bill of exchange is defined as. A bill of exchange means a binding agreement by one party to pay a fixed amount of money to another party as on a specified date or on-demand. In other words, it is a written negotiable instrument containing an unconditional order to pay a specified sum of money to a certain person or to the bearer of the instrument, as directed in the instrument by the maker. The bill of exchange is either payable on demand or after a specified period.

 

Meaning of Bill of Exchange

A bill of exchange is a document that is drawn by one person and directs another person to pay another person a specific sum of money. If the individual who is supposed to pay the sum accepts the bill of exchange, it is of practical use.

 

Features of the bill of exchange

It must be in writing. No verbal note would consider as valid.

It must contain an order to pay a certain sum of money and not just a request.

The order should not have any condition.

It must be dated and should be properly stamped, duly signed by the maker (the creditor), and accepted by the drawee (the debtor).

The money must be payable to a definite person or to his order to the bearer of the instrument.

It must contain the date by which the money should be paid. A fixed date for the amount to be paid must be mentioned.

 Download CMA Foundation Study Material on Bill of Exchange Fundamental of Accounting.


Dishonor and Discharge of Bills

The drawer can deal with the bill in the following ways:

  • Retain till maturity
  • Discount with the bank
  • Endorse in favor of another person
  • Send it for collection to the bank

 

Browse the video for more Topics under Bills Of Exchange

  1. Meaning and Features of Bills of Exchange
  2. Types of Bills of Exchange
  3. Discounting of Bills
  4. Renewal of Bill


 We hope you found the information presented in this post to be helpful. Wishing you the best of success with your next examinations! Continue reading about this topic  Bills of Exchange -CMA Foundation.


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