1.Inland bill 2.Forigen bill3. Commercial Bill4. Accommodation Bill5. Time Bill6. Demand Bill
It is defined as:
1. A person who wants to purchase goods but has no money, may agree to accept a bill of exchange drawn upon him at some future date for the value of the goods he want to purchase. For example, Mr. Jacky (a retail trader) wishes to purchase furniture from a furniture manufacturer (Mr. David) but has no money. Mr. David is agreed to sell furniture for a 90 days credit worth US$ 10,000.
2. The drawer (Mr. David) draws a bill for US$ 10,000 on the customer (Mr. Jacky), the drawee, who accepts it (thus becoming the acceptor of the bill) and returns it to the drawer. The drawer delivers the furniture and has a 90 days bill for US$ 10,000.
3. He can keep the bill till due date and present it on the due date before the acceptor.
4. When a drawee (the acceptor) acknowledges the obligation in the bill he is bound by law to honor the bill on the due date. If he is reputable person the bill is as good as money, and any bank will discount it. There are special kinds of banks which do this job and they are called discount houses. What do the discount houses do? , The cash the bill by giving the drawer the present value of the bill.
Present value = Face value of the bill – interest at an agreed rate for the number of days the bank has to wait.
So the drawer who discounts the bill with the bank gets less than the face value.
5. On the due date the bank will present the bill to the acceptor, who honors it by paying the full value. The bank has earned the amount of interest it deducted when it discounted the bill.
Types of bill of Exchange
A Bill of Exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only o or to the order of a certain person or to the bearer to the instrument
A Bill of Exchange is therefore a written acknowledgement of the debt, written by the creditor and accepted by the debtor. There are usually three parties to a bill of exchange drawer, acceptor and payer. Drawer himself may be payer. A Bill of Exchange may be
inland or external foreign bill. The essential characteristics of Bill of Exchange are as follows:
(A) a bill of exchange is a written instrument signed by the drawer of maker.
(B) It contains an expression and an unconditional order to pay money and money alone
(C) It is drawn by he creditor or any other person and is accepted by the debtor
(D) The dept may be payable on demand or on the expiry of a fixed period in the legal tender money of he country
(E) The sum payable, the date of payment and the payer all things must be certain and definite
(F) It is properly stamped
Types of bill of exchange
A bill of exchange is a negotiable instrument. It is the instrument which binds the two parties in the contract in which one party gives in writing that the other party will make the payment of the specific date and time. It has the potential for transfer from one party to another party. There are three parties involved in the bill of exchange one is the drawer, drawee and the beneficiary. A drawer is a person who makes or issues the bill of exchange and the facilitates the drawee to pay the bill. A drawee is the person who promises to pay the money on a certain specific date.
In a bill of exchange it is clearly mentioned that the drawee is liable to pay the money to the drawer at the specific data and time. So there is an obligation on the drawer and drawee as well. The beneficiary is the person to whom the drawee has to pay the money if the bills of exchange are in the hands of beneficiary. So this is the bills of exchange and its features for the people.
It is usually a invoice reflecting the services or goods received, the amount paid, when paid , how it was paid and details the purchase item, transaction and related information.
A bill of exchange is playing an important part in the commercial life of the country. The need for it arises where the buyer of goods needs a period of credit before paying it, it is drawn by the creditor and is accepted by the debtor. According to F.W Muller a bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is to pay on demand or at a fixed or determinable future time a sum certain in money to or the order of a certain person or to bearer. There are certain characteristics of the bill of exchange. A bill of exchange must be in writing. It must contain an order to pay. The order to pay must be unconditional. If it is subject to the happening of some events, it will not be a bill of exchange.
It must be signed by the drawer and properly stamped. The parties to the bill, the drawer and the drawee and payee must be certain and definite individuals. The amount payable must be certain. The payment must be made in money and not in kind.
A bill of exchange is a written order to pay money to the payee. This draft is written by the drawer to the drawee. The most common type of bill of exchange is the cheque which is drawn on a banker and it is payable on demand. The major feature of bills of exchange is that it is used in the international trade. These drafts are in written form. Bill of exchange is given to the bank by an individual to pay a specific sum of money to a bearer on a specified date. Bills of exchange are not as often used today as they were used previously because they were the common means of exchange prior to the advent of the paper currency.
Following are the types of bill of exchanges:
The bill of exchange
The banker's acceptance
And the foreign exchange bill.
It shows details of the goods, their destination and the terms under which the shipping company agrees to carry the goods.