Bills of exchange is defined as an “instrument in writing containing an unconditional 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.” Suppose, A order B to pay Rs. 500 three months after date and B accepts this order by signing, then it will be a bill of exchange. Important points of BOE A bill of exchange must be in writing It must be dated It must contain an order to pay a certain sum of money The money must be payable to a definite person or to his order to the bearer The draft must be accepted for payment by the party to whom the order is made 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 A bill of exchange can be passed on to another person by endorsement Section 12 of Negotiable Instruments Act provides that all instruments which are not inland instruments are foreign. The following are the examples of foreign bills: 1. A bill drawn in India on a person resident outside India and made payable outside India. 2. A bill drawn outside India on a person resident outside India. 3. A bill drawn outside India and made payable in India. 4. A bill drawn outside India and made payable outside India. Batch: August 2013 Promissory Notes It must be in writing It must contain a clear promise to pay. Mere acknowledgement of debt is not a promissory note The promise to pay must be unconditional The promisor or maker must sign it The sum payable must be certain Payment must be in legal currency It should not be made payable to the bearer It should be properly stamped Record of BOE & Promissory Notes Entries in the books of the party which receives promissory notes or bills. 1. On receipt of Bill: Bills Receivable Account …. Dr. To Drawee/Maker of the note The person who receives the bill has three options i. He can hold the bill till maturity.In this case no further entry is passed until the date of maturity arrives ii. The bill can be endorsed in favour of another party Receiver of the bill (A) a/c …. Dr. To Bills Receivable Account iii. The bill can be discounted with bank Bank a/c …. Dr. Discount a/c ….Dr. To Bills Receivable Account Batch: August 2013 2. On the date of maturity: If the bill is paid i.e. it is met or honored Cash a/c ....Dr. To Bills Receivable Account If the bill is dishonored a) If the bill was kept till maturity Drawee/Maker of the note ….Dr. To Bills Receivable Account b) If the bill was endorsed in favour of a creditor Drawee/Maker of the note Dr To Creditors c) If the bill was discounted with the bank Drawee/Maker of the no
Posted on: Tue, 29 Oct 2013 04:25:54 +0000
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