TS Grewal Solution for Class 11 Accountancy Chapter 12

According to the Negotiable Instruments Act 1881, a bill of exchange is "a document in writing embodying an unconditional order, signed by the maker, instructing a particular person to pay a certain quantity of money solely to, or to the order of a specific person, or the bearer of the instrument."

Characteristics of a Bill of Exchange

• Having a documented bill of exchange is essential. It must include a payment confirmation order, not just a request.

• The order should not include any conditions.

• The bill of exchange's amount should be set.

• The amount owed will be payable on a certain day.

• The bill must be signed by both the drawee and the drawer.

• The amount mentioned on the bill should be paid on demand or at the end of a certain period of time.

• The money is given to the bill's recipient, a specific individual, or in response to a specific request.

Bills of Exchange 

• Documentary Bill- The bill of exchange is supported by supporting documents that attest to the authenticity of the sale or transaction between the seller and the buyer in this scenario.

• Obtain a bill- This bill must be paid as soon as possible. The bill must be cleared whenever it is sent because there is no specified payment deadline.

• A use bill is a time-bound bill, indicating that payment must be paid within a certain amount of time.

• Inland Bill- An inland bill is only good for one country and cannot be used in another. This measure is the polar opposite of the foreign bill.

• The interest rate on a clean bill is higher than on other bills since it does not need the verification of a document.

• A bill that may be paid outside of India is referred to as a "foreign bill."

• Two examples of foreign bills are an export bill and an import bill.

• A law that has been sponsored, developed, and accepted without conditions is known as an accommodation bill.

• A trade measure is a law that focuses only on trade.

• Supply Bill- A supply bill is a bill that is withdrawn from a government agency by a supplier or contractor.

Because it is a legal instrument, it will be easier for the drawer to lawfully retrieve the money if the drawee fails to pay.

Discounting Facility- If the drawer requires money immediately, the bill can be converted to cash by discounting it from a bank for a little cost.

An endorsement is an option—this bill of exchange can be exchanged from one person to another to pay off a debt.

Parties to the Bill of Exchange

A bill of exchange involves three parties:

• Drawer

• A bill of exchange is created by the drawer.

• The drawer is the one who signs the bill.

• A bill of exchange can be drawn by a creditor who is entitled to payment from the debtor.

• Winner:

• The individual on whom the bill of exchange is drawn is known as the drawee.

• The debtor who must pay the money to the drawer is known as the drawee.

• 'Acceptor' is another name for him.

• Recipient:

• The payee is the individual who must receive payment.

• The drawer or a third party might be the payee.

What is the Meaning of a Promissory Note?

A promissory note is a written instrument (not a banknote or currency note) that contains an unconditional pledge signed by the creator to pay a specified quantity of money solely to or on the direction of a specific person, or to the bearer of the instrument.

The Value of a Promissory Note in a Bill of Exchange

The meaning of a promissory note, according to the Negotiable Instruments Act of 1881, is "an instrument in writing (not a banknote or a currency note) containing an unconditional undertaking signed by the maker to pay a certain sum of money only to or on the order of a specific person, or to the bearer of the instrument." A promissory note payable to the bearer, on the other hand, is prohibited under the Reserve Bank of India Act. As a result, a promissory note can't be paid to the bearer.'

The Signatories to a Promissory Note

A Promissory Note has two parties: the holder and the holder's holder's holder's holder's holder's

• Maker: 

• A maker or drawer is a person or company who creates or draws a promissory note with the commitment to pay a specific amount as indicated in the note. The promisor is another name for Maker.

• Payee: 

• The payee is the individual who is the beneficiary of the promissory note.

• The idea of the 'Bill of Exchange' is explained in detail for Commerce students in the above-stated section.

Key Takeaways for Class 11 TS Grewal Solution Accountancy Chapter 12 Solution

Below are the main takeaways from the Class 11 Accounts TS Grewal solutions Chapter 12 Accounting for Bills of Exchange.

• First, a bill exchange can only take place when there are three parties involved. The first one is the drawee, which is the party that pays the amount. The payee is the one who receives the money from the drawee. Finally, there is a drawer that is here to oblige the drawee to pay to a payee.

• A bill exchange is mainly used to make international trade to help importers and exporters complete their transactions successfully quickly.

• Moreover, a bill exchange cannot be termed as a contract in itself. But the parties involved in the exchange can outline the terms of the transaction, such as the credit terms and the rate of accrued interest.

What are the Different Types of Bills Exchange?

In Class 11 TS Grewal solutions Chapter 12 PDF, you learn about different bills exchanged between two parties. A bill that is issued by a bank to a payee is said to be a bank draft. In this exchange, the bank takes the guarantees of the payment done in the transactions.

On the other hand, if individuals take out the bills' exchange, it is said to be a trade draft. Also, a sight draft is a type of bill exchange where the funds need to be paid immediately or on-demand.

Conclusion

With three parties coming together to make a bill exchange possible, in this exchange, sometimes a drawer and the payee can be the same entity when the drawer does not transfer the bill exchange to a third-party payee. Download the PDF of this topic and save it in the drive.