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Question
Distinguish between bill of exchange and promissory note
Solution
| Basis of Difference | Bills of Exchange | Promissory Note |
| Order or promise | It is an order to pay. | It is a promise to pay. |
| Parties | There are three parties involved, drawer, acceptor and payee. |
There are two parties involved, maker and payee. |
| Drawer | It is drawn by the creditor. | It is drawn by the debtors. |
| Acceptance | It needs acceptance by the drawee. | As it is prepared by promissor, so no acceptance is required. |
| Payee | Drawer and payee may be the same. | Promissory cannot be the payee. |
| Noting | In case of dishonour of the bill, the bill may get noted. | Noting is not necessary. |
| Liability | Drawer is not primarily liable. | Promissory is the primarily liable. |
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RELATED QUESTIONS
Name the parties to a promissory note
On Jan 01, 2016, Shankar purchased goods from Parvati for ₹ 8,000 and immediately drew a promissory note in favour of Parvati payable after 3 months. On the date of maturity of the promissory note, the Government of India declared holiday under the Negotiable Instrument Act 1881. Since, Parvati was unaware about the provision of the law regarding the date of maturity of the bill, she handed over the bill to her lawyer, who duly presented the bill and received the payment. The amount of the bill was handed over by the lawyer to Parvati immediately. Record the necessary Journal entries in the books of Parvati and Shankar.
Following was the position of debtor and creditor of Gautam as on 1.1.2017.
|
Debtors |
Creditors |
|
|
Babu |
5,000 |
– |
|
Chanderkala |
8,000 |
– |
|
Kiran |
13,500 |
– |
|
Anita |
14,000 |
– |
|
Anju |
– |
5,000 |
|
Sheiba |
– |
12,000 |
|
Manju |
– |
6,000 |
The following transactions took place in the month of Jan 2017:
|
Jan.02 |
Drew on Babu at two months after date at full settlement for ₹ 4,800. Babu accepted the bill and returned it on 5.1.2017. |
|
Jan.04 |
Babu’s bill discounted for ₹ 4,750. |
|
Jan.08 |
Chanderkala sent a promissory note for ₹ 8,000 payable three months after date. |
|
Jan.10 |
Promissory note received from Chanderkala discounted for ₹ 7,900 |
|
Jan.12 |
Accepted Sheiba draft for the amount due payable two months after date. |
|
Jan.22 |
Anita sent his promissory note payable after two months. |
|
Jan.23 |
Anita’s promissory note endorsed in favour of Manju. |
|
Jan.25 |
Accepted Anju’s draft payable after three months. |
|
Jan.29 |
Kiran sent ₹ 2,000 in cash and a promissory note for the balance payable after three months. |
Record the above transactions in the proper subsidiary books.
