BILLS OF EXCHANGE

BILLS OF EXCHANGE:
  A Bill of Exchange has been defined as an '' instrument in writing containing anunconditional 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.''
The following points should be noted:
1.A Bill of Exchange must be in writing.
2.It must be dated.
3.It must contain an order to pay certain sum of money.
4.The money must be payable to a definite person or to his order to the bearer.
*The party which makes the order is known as the drawer.
*The party which accepts the order is known as the acceptor.
*The party to whom the amount has to be paid is known as the payee.
*The drawer and the payee can be the same.
SPECIMEN OF A BILL OF EXCHANGE:

Advantages of Bills of Exchange:

A bill of exchange is a very useful instrument.

The following are the main advantages:

1. It facilitates movement of capital, because it is an instrument of credit.

2. It is a valid evidence of debt. It is a full proof of indebtedness.

3. Since the date of payment is fixed, debtor knows when he has to pay and the creditor knows when to expect his money.

4. The creditor can allow credit and at the same time capital is not locked up.

5. Since it is a negotiable instrument, it can easily be transferred in settlement of debts.

6. It is easy and convenient for remitting money from one place to another place.

7. Free transfer facility of bills enhances commercial transactions.

8. If the Drawer is in need of money, the Bill can be converted into cash, by discounting it with a bank, at a very nominal expense.