1.

Under what conditions an Accommodation Bill is written and how is it different from a Trade Bill?

Answer»

Accommodation Bills are written under the following conditions: 

1. A trader draws a bill on the other trader and gets his acceptance. He then discounts it with the bank and uses the money. He sends the money to the acceptor before the due date and the acceptor meets the bill on the due date.

2. A trader draws a bill on the other trader and gets his acceptance. He then discounts the bill with the bank. Then both the traders divide the amount and discount among themselves in a pre-determined ratio. Before the date of maturity, the drawer sends his share of money to the acceptor and the acceptor meets the bill on the maturity date.

3. Sometimes both the traders draw a bill on each other. Both the bills may be of the same amount or maybe of different amounts. The traders discount the bills with the respective bank and on the due date, each of them pays off his respective bill.

Differences between Accommodation Bill and Trade Bill:

Basis of DifferenceAccommodation BillTrade Bill
1. BasisIt is not on the basis of the business transaction.Its basis is the business transaction.
2. ReturnIt is not written for any valuable return.It is drawn for getting a valuable return.
3. ObjectiveThese bills are drawn to remove temporary financial difficulties.These bills are drawn by one party on another to realise the amount.
4. Payment by BankBank hesitates to make the payments of such bills.Bank does not hesitate for making the payments of such bills.
5. The relation between Debtor and CreditorRelationship of Debtor and Creditor does not exist between the writer and acceptor of the bill.Debtor and Creditor relationship exists between the writer and acceptor of the bill.


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