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Seller or Debtor.

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:

Correct option is (b) Special

Crossing a cheque means drawing two oblique lines on the face of the cheque on the upper left corner. The crossing of a cheque is of following two types:

1. General crossing 

2. Special crossing

Two advantages:

1. Crossing a cheque makes it difficult for a wrong person to get payment of the cheque. 

2. Payment of money only through an account with the (UPBoardSolutions.com) bank and not in cash.

An Accommodation bill is a Bill of Exchange for which no consideration is given by the drawer to the acceptor, but which has been drawn and accepted by the parties concerned for their mutual accommodation with a view to raise money by negotiating it.

Hundi: Hundi is also a very popular credit instrument among the Indian businessmen from times immemorial. Even in today’s world, Hundi is used by most of the Indian businessmen. Hundreds were in (UPBoardSolutions.com) circulation even when the banks did not exist. Hundies are of different nature from Bills of Exchange. Since Hundies are private credit instruments, the Government has no control over them. Hundi may be written in any of the regional languages of India. Hundies are written for a fixed period or are payable on demand.

Promissory Note: There is another method by which the promise made by the purchaser to pay for goods bought by him can be made which is definite and absolutely binding upon him. Such a promise is signed by the debtor and is handed over to the creditor, is called a ‘Promissory Note’.

A Promissory Note is legally defined as, “an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand or at a fixed or determinable future time a sum of certain money to or to the order of a specified person.”

There are only two parties of Promissory Note. The person who has written the Promissory Note and signs it, is known as the ‘maker’. In the given specimen S.K. & Co. is the maker. The person who receives the payment is known as ‘Payee’. In the given specimen, R. S. & Sons are the payees.

Hundis were in circulation even when the banks did not exist. Hundis are private credit instruments of the Government has no control over them. Hundi may be written in any of the regional languages of India. Hundis are written for a fixed period or are payable on demand.

Difference between Bill of Exchange and Promissory Note:

Meaning of Bill of Exchange: When goods are sold on a credit basis, the businessman does not get cash immediately, but he gets it after a stipulated time. In the meantime, he is supplied with a written acknowledgement of debt, which is known as Bills of Exchange.

Difference between Bill of Exchange and Cheque:

The bill is dishonoured when the drawee is unable to make the payment on the maturity of the bill. When a bill is dishonoured, immediate notice should be given to the drawee and to the endorser. If this is not done, the holder of the bill cannot for the due amount

Bill of Exchange: When goods are sold on a credit basis, the businessman does not get cash immediately, but he gets it after a stipulated time. In the mean-time, he is supplied with a written acknowledgement of debt, which known as Bills of Exchange. 

Parties of Bills of Exchange: 

1.. Drawer: He is the person who writes or draws the Bills of Exchange. 

2. Drawee: Drawee is a person on whom Bill of Exchange has been drawn.

3. Payee: Payee is the person to whom the amount mentioned in the Bill is paid.

Correct option is (b) 3

(c) Contingent liability

“A Bill of Exchange is an instrument in writing, containing an unconditional order signed by the maker, directing to pay a certain sum of money after a certain period to him or to the order of a certain person or to the bearer of the instrument”.

Two kinds of Bills of Exchange are very much popular:

• Bill of Exchange payable on-demand or on presentation, and
• Bill of Exchange payable after a specific period.

Special or full.

Meaning of Dishonour of Bill. The bill is dishonoured when the drawee is unable to make the payment on the maturity of the bill. When a bill is dishonoured, immediate notice should be given to the drawee and to (UPBoardSolutions.com) the endorser. If this is not done, the holder of the bill cannot claim for the due amount.

All the expenses incurred, relating to the dishonour of the bill should be debited to the person from whom the bill was received. The acceptor of the bill is primarily liable for payment, but the holder has a right to take actions against the drawer and other endorsers of the bill. Usually, the drawer takes up the bill dishonour and then exercises his right against the drawee.

Journal Entries in the books of a drawer under the five possibilities are as follows:

1. When the bill is retained with him, till the date of maturity Acceptor’s A/c Dr. To Bills Receivable A/c To Cash A/c (Being Bill dishonoured and noting charges paid in cash) Note: If noting charges are not paid then Cash A/c is not credited, the amount of bill is mentioned in the entry. 

2. When the drawer gets the Bill discounted with a bank: Acceptor’s A/c Dr. To Bank A/c (Being Bill dishonoured and noting charges paid by the bank) 

3. When the Bill is endorsed by the drawer: Acceptor’s A/c Dr. To Creditor’s A/c (Being Bill dishonoured and noting charges added) 

4. When the drawer deposits the Bill with bank for collection. Acceptor’s A/c Dr. To Bill for collection A/c To Bank A/c (Being Bill dishonoured and noting charges paid by the bank) 

5. In the book of drawee journal entries when Bill is dishonoured. B/P a/c Dr. (If given )Noting charges a/c Dr. To Drawer (Being Bill dishonoured and Noting charged paid)