Bill of exchange
Bill of Exchange is a written order usually issued by the buyer of the goods or services to the seller of the goods by properly signing it. The issuer of the bill is called Drawer while the receiver of the bill is called Drawee. It is a non interest bearing bill and is often used in international trade. It is often denoted by BOE.
Types of BOE
Sight bill: when the bill requires the drawer to pay immediately.
Term bill: when the bill requires the drawer to pay at some future date.
Components of BOE
- Terms of the bills – whether the bill requires immediate payment or payment at some future date
- Time period – the bill must mention the time when the payment has to be made
- Specific amount – bill should be for the exact amount
- Name of drawee – the person who is making the bill usually the buyer of the goods or services
- Place of the payment – the location where the payment will be made should be written on the bill
- The signature of the drawer – the issuer of the bill must sign it to make it valuable for the payment.
Learn about key differences:
Difference between Bank Draft and Cheque
Differences between a Promissory note and a Cheque