Definition and Explanation of Bill of Exchange

Definition and Explanation of Bill of Exchange:

A bill of exchange has been defined as an unconditional order in writing addressed by one person to another; signed by the person giving it, requiring, the person to whom it is addressed to pay on demand or at a fixed or determinable future time, a certain sum in money to or to the order of a specified person or to bearer.

Difference Between Inland and Foreign Bills:

The bill of exchange may be inland or foreign. An inland bill is a bill which is both drawn and payable within the a country. A foreign bill is one which is drawn in one country but accepted and payable in another country.

Parties to a Bill of Exchange:

There are three parties in a bill:

  1. Drawer

  2. Drawee

  3. Payee

Specimen/Sample of a Bill of Exchange:

Stamp  Amount

1st January, 2010

Three month after date pay to Z or order the sum of [amount] only for value received
B (Drawer)

Sd.X. (Drawer)

You may also be interested in other articles from “accounting for bills of exchange page” chapter:

  1. Definition and Explanation of Bill of Exchange
  2. Advantages of a Bills of Exchange
  3. How a Bill of Exchange Functions
  4. Promissory Note
  5. Difference between Bill of Exchange and Promissory Note
  6. Difference Between Bill of Exchange and Cheque/Check
  7. Recording Transactions of Bill of Exchange
  8. Drawing, Acceptance, and Payment of Bill of Exchange
  9. Discounting of Bill of Exchange
  10. Bills of Exchange for Collection
  11. Endorsement of a Bill of Exchange
  12. Dishonour of a Bill of Exchange
  13. Renewal of a Bill of Exchange
  14. Retiring of a Bill of Exchange
  15. Accommodation Bill of Exchange
  16. Insolvency of the Acceptor in a Bill of Exchange

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