Bill of Exchange Test - 3

it is a custom to add 3 days in the period of a bill to calculate due date of the bill. such 3 extra days are called days of grace.

Initially noting charge is paid by the drawer but subsequently it is recovered by the drawer from the drawee. hence the burden of noting charge is ultimately is borne by the drawee.

The payee is the person whose name is mentioned in the bill of exchange and to whom the amount is to be paid. the payee may be the drawer himself or a third party.

if an endorsed bill is dishonoured, the liability of drawee will be restored( since he has not made payment to endorsee) and liability to endorsee(since endorsee has not received the payment) will also be restored. the journal entry is:

drawer       DR
   To endorsee

( being endorsed bill is dishonoured)

when the drawee of the pays amount of bill before the date of maturity, it is retiring the bill. generally holder of the bill, in such cases, allows some deductions to the drawee because of early payment made by him such discount is called the rebate.

because of the inability of the drawee to pay the amount of bill he requests the drawer to substitute the old bill with a new one. this is called the renewal of the bill.

In the case of renewal of bill, if the acceptor doesn't pay interest then it will be included in the amount of the bill.

Sometimes, the drawee shows his inability to pay the amount of bill before the date of maturity, in such cases, he requests the drawer to renew the bill.

Noting charge is paid by the drawer to the notary public just to get the evidence of dishonour but subsequently, it is recovered from the draweer.

This bill is drawn just for the mutual help of the parties to the bill of exchange.