Gujarat BoardEnglish MediumSTD 12 CommerceOCMFINANCIAL MARKET3 Marks
Question
Write a detailed note on commercial bills.
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Answer
When a buyer purchases goods on credit, the seller draws a commercial bill on buyer. It is an unconditional order to pay specified amount of goods in full.
Commercial bill is negotiable and arises out of business transactions.
There are many types of commercial bills such as exchange bill, hundi, inland bill, demand bill, foreign bill, etc.
Generally, commercial bills have maturity period of $30, 60, 90$ days. In other words, the buyer gets a credit of the said days. He needs to make the payment to the seller within the specified maturity date.
At times, the buyers approach the commercial banks to accept the bill on the behalf of buyers. This means that in case the buyers are unable to make the payment to the sellers on maturity date, the banks will make the payment. For this service, the banks charge a commission from the buyers.
The bank pays to the seller after discounting the bill i.e. after charging interest on the bill for the number of days the buyer wish to have the credit. This is called discounting of bill.
In case, if the bank requires money, it can send the bill to other financial institution. That institution $($or bank$)$ will accept the bill, rediscount it and pay to the previous bank.
When the seller draws the bill on buyer the bill is called Trade Bill’ and when this bill is accepted by the commercial banks, it becomes ‘Commercial Bill’.
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