CBSE Class 11-commerce Answered

Advantages of bill of exchange

1. Legal document: A bill of exchange is a legal written document under the Negotiable Instruments Act, 1881. It involves less risk, in case of debt involvement.
2. Ease in credit transactions: A bill of exchange is a written unconditional promise to pay. Hence, credit transactions of purchases and sales can be carried out with ease, based on agreed terms.
3. Recovery of amount: As the time at which money would be received is predetermined, the creditor must know when he/she would recover the amount. If the bill is dishonoured, it is easier to recover the amount because of its legality.
4. Discounting facility: As the bill can be discounted with the bank, the creditor can receive the funds immediately from the bank. This is done in case of emergencies and the bank can later on collect the amount from the drawee of the bill.
5. Endorsement of the bill: The bill can be endorsed to another person and serves the similar purpose as cash.