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Creation of Bill Of Exchange: Most of the sales will be on credit basis. Buyer purchases goods on terms and conditions that, he’ll pay for the purchases on some future date. The seller draws a bill of exchange of a given maturity on the buyer. Seller is Creditor & called as Drawer. Buyer is Debtor & called as Drawee . Buyer accepts the bill by signing on the Bill. The acceptor could be the buyer himself or any third party willing to take on the credit risk of the buyer.
Funds for working capital required by commerce and industry are mainly provided by banks through cash credits, Overdrafts and purchase/discounting of commercial bills. Bill finance is provided by banks. Bill market is a place where the bills accepted by bankers or Acceptance Houses are discounted.
Bill of Exchange: Short term financial instrument and is widely used method of short term financing . Known as acceptance credit where one party accepts the liability of trade towards third party. Used as medium of financing the current trade and is not used for financing capital purposes. It is a fund based activity
Types of Bills:
Demand Bills Usance Bills Documentary Bills Document against Acceptance (D/A) Bills Documents against Payment (D/P) Bills Clean Bills Inland Bills Foreign Bills Accommodation Bills Supply Bills.
Terms allow this type of credits, the bank receives the amount of shipping documents, accompanied with a bill of exchange drawn by the beneficiary importer "student to open the credit", and have to pay this bill either when found, or after a certain period of passage.
Already explained in detail by Venkitaraman and Gerogei. Acceptance of a Credit Bill of exchange (promissory note) to pay in future once the terms of the acceptance completed.
Credit mean in banks sense, available balance, Credit means in mobile company balance in mobile available for use to calls etc
I agree with all answers given by colleagues.
Agreed with the answers to colleagues
Sir I just want to add bills of exchange can also be endoresed to creditors. It can be used as cash for payments thogh there is a trust element envolved. The original owner of the bills payable has to honour the bill.
We all MUST be honest with each other , I mean its not matter of Just answer but matter of accurate answer and as most of above I agree for sure with Mr.Gerogei & Mr. Venkitaraman , as I think its the ideal answer.
Always great question and Great answer this is new information for me
agree with mr venkitraman and georgei
