Page 4 - LESSON NOTE

It is valid only when accepted by the It does not require any acceptance
4. Acceptance
drawee. from the drawee.

It case of bill of exchange, drawer can be Drawer or maker cannot the payee of
5. Payee
the payee of the bill Promissory note.

It case of dishonor of bill Noting becomes Noting is not necessary in case of
6. Noting
important. dishonor of promissory note.

The liability of the drawer arises only if the The liability of the drawer (maker) is
7. Liability
drawee fails to make payment primary

Important terms
1. Term of Bill: The period intervening between the date on which a bill is drawn
and the date on which it becomes due for payment is called “Term of Bill’.
2. Due Date: Due date is the date on which the payment of the bill is due.
(i) In case of ‘Bill at Sight’:- Due date is the date on which a bill is presented for
the payment

(ii) In case of ‘Bill after date’:- Due Date: – Date of Drawing + Term of Bill.
(iii) In case of ‘Bill after sight’:-Due date: – Date of Acceptance +Term of Bill.
3. Days of Grace: Drawee is allowed three extra days after the due date of bill for
making payments. Such 3 days are known as ‘Days of Grace’. It is a custom to add
the days of grace.
4. Date of Maturity: The date which comes after adding three days of grace to
the due date of a bill is called “Date of maturity’.
5. Discounting of Bill: When the bill is encased from the bank before its due

date, it is known as discounting of bill. Bank deducts its charges from the amount
of bill and is disburses the balance amount.
6. Endorsement of Bill: Endorsement of bill means the process by which drawer
or holder of bill transfer the title of bill in favour of his/her creditors. The person
transferring the title is called “Endorser” and the person to whom the bill is
transferred called “Endorsee’. Endorsement is executed by putting the signature
at the back of the bill.

7. Bill sent for Collection: It is a process when the bill is sent to bank with
instruction to keep the bill till maturity and collect its amount from the acceptor
on the date of maturity.