Page 1 - LESSON NOTE

Class-XI

Accountancy

Topic – BILLS OF EXCHANGE

Meaning of Bill of Exchange

According to the Negotiable Instruments Act 1881, ‘a bill 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.’

Features of Bill of Exchange

 It is important to have a bill of exchange in writing

 It must contain a confirm order to make a payment and not just the
request

 The order should not have any condition
 The bill of exchange amount should be definite
 Fixed date for the amount to be paid

 The bill must be signed by both the drawee and the drawer
 The amount stated on the bill should be paid on-demand or on the
expiry of a fixed time

 The amount is paid to the beneficiary of the bill, specific person, or
against a definite order

Advantages of Bill of Exchange

 Legal Document- It is a legal document, and if the drawee fails to
make the payment it will be easier for the drawer to recover the
amount legally.
 Discounting Facility- The bill bearer has to wait till the due date of
the bill to receive the payment and it from the bank before its due
date.