Do You know Advantages of Bills of Exchange ?

Advantages of Bills of Exchange ?

(1) Helpful in the purchase and sale of goods on credit :

A bill of exchange serves as a written evidence of debt. It is a proof that the purchaser of goods (or the acceptor of the bill) owes the amount written in it. As such the goods can be sold on credit without difficulty.

(2) Legal Document:

It is a valid document in the eyes of law. If the drawee fails to make its payment, it would be easier to recover the amount legally in comparison to a verbal promise.

(3) Discounting Facility :

The holder of a bill need not wait till the due date of the bill to receive its payment as he can easily turn it into cash by discounting it from the bank before its due date.

(4) Endorsement Possible :-

A bill of exchange can be easily transferred from one person to another in settlement of debts as it is a negotiable instrument.

(5) Relief from sending reminders :-

The seller need not approach the purchaser time and again to demand the payment because the date of payment is fixed and written on the bill of exchange.

(6) Helpful in planning cash operations :-

The seller knows the time when he would receive the money and, as such, he can plan his cash operations accordingly.

(7) Convenient means of making foreign payment:-

Bills of Exchange enable the firms to receive and make payments in case of foreign trade also. It avoids the trouble and risk of transmitting the foreign currency from one place to another.

(8) Saving of money in circulation :-

A bill of exchange performs the functions of money. By making payment through bills, the money in circulation will not be used and hence results in the saving of wear and tear in the currency in circulation,

(9) Convenience for the purchaser :-

By accepting a bill, a purchaser gets time Advantages of Bills of Exchange

(1) lidtul in the purchase and sale of goods on credit :

A bill of exchange serves as a written evidence of debt. It is a proof that the purchaser of goods (or the acceptor of the bill) owes the amount written in it. As such the goods can be sold on credit without difficulty.

(2) Legal Document :-

It is a valid document in the eyes of law. If the drawee fails to make its payment, it would be easier to recover the amount legally in comparison to a verbal promise.

(3) Discounting Facility :-

The holder of a bill need not wait till the due date of the bill to receive its payment as he can easily turn it into cash by discounting it from the bank before its due date.

(4) Endorsement Possible :-

A bill of exchange can be easily transferred from one person to another in settlement of debts as it is a negotiable instrument.

(5) Relief from sending reminders :-

The seller need not approach the purchaser time and again to demand the payment because the date of payment is fixed and written on the bill of exchange.

(6) Helpful in planning cash operations :-

The seller knows the time when he would receive the money and, as such, he can plan his cash operations accordingly.

(7) Convenient means of making foreign payment:-

Bills of Exchange enable the firms to receive and make payments in case of foreign trade also. It avoids the trouble and risk of transmitting the foreign currency from one place to another.

(8) Saving of money in circulation :-

A bill of exchange performs the functions of money. By making payment through bills, the money in circulation will not be used and hence results in the saving of wear and tear in the currency in circulation,

(9) Convenience for the purchaser :-

By accepting a bill, a purchaser gets time to make the payment. As such, he can purchase more goods and increase his business. Moreover, he cannot be called upon to make the payment at a date earlier than the one fixed in the bill.

Due to these advantages, bills of exchange have become extremely popular device for the grant of credit in business.

A bill of exchange closely resembles another document called the ‘Promissory Note’ –

Promissory Note :- Sometimes, the purchaser of the goods or debtor himself writes a note, signs it and gives it to the seller of the goods. It is called a ‘Promissory Note’. According to Indian Negotiable Instrument Act, “A Promissory Note is an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking signed by the maker to pay a certain sum of money to, or to the order of, a certain person”.

Features :-

(1) It must be in writing.

(2) There must be a promise to pay a certain sum of money in it. For example, “I owe you rupees ten thousand” is not a promissory note because it is merely an acknowledgement of debt and there is no promise to pay.

> (3) The promise to make payment must be unconditional. For example, “I promise to pay 310,000 as soon as possible” is not a promissory note because it is not unconditional

(4) The amount to be paid must be specified (definite). (5) It must be signed by the maker or promisor. (6) The name of the payee must be mentioned in it. (7) The promissory note cannot be made payable to bearer. (8) It must be stamped according to its value.

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