This GSEB Class 11 Commerce Accounts Notes Part 2 Chapter 4 Bills of Exchange covers all the important topics and concepts as mentioned in the chapter.
Bills of Exchange Class 11 GSEB Notes
In the business most of the transactions of purchase and sales are the credit transaction. For the cash transactions, trader has to keep more capital (cash) or trader has to make arrangement of cash with the help of bank loan, bank overdraft or by order loan, etc. Now, for the credit transaction, if the money is not received in the predecided time period, then it may create a problem for industry or trade. Moreover, the question of safety of money is also important in the case of credit transaction. To overcome this type of the problem, upto certain extent and to get the written evidence for the sell-out goods, vendor company writes a document (letter) to the purchaser of the goods stating the cost of the goods and period for the payment of transaction. Now, if a purchaser or debtor signs for acceptance of this document then it can be said that document is completed. In our country, this type of the document is known as ‘Hundi’ and in foreign countries, it is known as ‘Bills of exchange’.
Sometimes, purchaser (debtor) of the goods, in writing give the promise to pay the amount of goods purchased or any other unpaid amount (A debt for the purchaser) to the creditor after certain period and signed the written note and returns it to the creditor. This written note is known as Promissory note.
Bill of exchange and Promissory note are considered as the important tools (document) for the payment of debts and receipts in the modern commerce.
→ The document used for the settlement of credit transactions are of two types :
- Bill of exchange and
- Promissory note.
→ Bill of exchange is also called letter of exchange.
→ There are three parties in Bill of exchange:
- Drawer of the bill
- Acceptor of the bill and
- Receiver of money (Payee).
→ There are two parties in Promissory note:
- Drawer or maker of the Promissory note and
- Receiver of money (Payee).
→ A bill is mainly known in two ways :
- Bills Receivable and
- Bills Payable.
→ Bills Receivable is an asset whereas Bills Payable is a liability.
→ The main types of the bills are as under :
- Bills payable immediately .on demand or Bills at sight.
- Bills payable after a stipulated period or Bills after dated (time).
→ Bills and Promissory note are instruments under the Indian Negotiable Instruments Act, 1881.
→ Noting of dishonour of a bill is not compulsory but it is essential and advisable. But in foreign trade, noting of dishonor of a bill is compulsory.
→ A promissory note can be drawn jointly by more than one person. In this case, each person becomes jointly and individually responsible for making the payment.