Page 120 - DEBK-XI(2020)

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C H A P T E R

Accounting for Bills of Exchange

MEANING OF KEY TERMS USED IN THE CHAPTER

1. Bill of Exchange It is a written instrument directing a person to pay the amount specified in
the bill to or to the order of specified person or bearer of the instrument.

2. Drawer Drawer is the person who draws the bill, i.e., makes the bill.

3. Drawee Drawee is the person who is directed by the drawer to pay and who gives
the acceptance.

4. Payee Payee is the person to whom drawee makes the payment.

5. Trade Bill It is the bill drawn and accepted for a business transaction.
6. Promissory Note It is an instrument in writing being an undertaking by the maker to pay certain
sum of money to or to the order of certain person or to the bearer of the
instrument.
7. Maker Maker is the person who makes the Promissory Note.

8. Discounting of a Bill It means taking amount from the bank before maturity.

9. Honouring the Bill It means meeting the obligation to pay.
10. Dishonour of a Bill It means not meeting the obligation to pay.

11. Noting of a Bill It is a process through which the bill is presented for payment through
a Notary Public. Notary Public makes a noting to the effect that bill is
dishonoured.

12. Noting Charges Charges paid to the notary public on the dishonour of a bill to record the
facts of dishonour. The amount of noting charges is recoverable from the
party who is responsible for dishonour of the bill.

13. Days of Grace Days added to the date of maturity.

14. Endorsing the Bill Transferring the bill of exchange or promissory note to another person by
the holder.