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bill of exchange and promissory note

Others 3925 views 3 replies

laxmi

Chartered Accountant (presently teaching

30 Points Posted on 30 September 2008

what is the difference between bill of exchange and promissory note.

Replies (3)

S.Srinivasaraghavan

Chief Financial Officer and Co

11318 Points Posted on 01 October 2008

The fundamental difference is as under:

A Bill of exchange is drawn by the person giving credit and is accepted by the person availing the credit in the favour of the drawer or his order to pay the beneficiary on certain future date.

A promissory note however is drawn by the borrower in favour of his creditor to pay on demand.

CA RAMESH KUMAR AHUJA

CA DISA LLB

5452 Points Posted on 01 October 2008

Bill Of Exchange	Promissory Note
There are three parties namely drawer, drawee and payee	There are only two parties viz maker and payee
The drawer and payee may be the same person	Maker cannot be the payee
There is an unconditional order to drawee to pay according to the drawer’s direction	Contains an unconditional promise by the maker to pay to the payee or to his order
Payable after sight must be accepted by the drawee or someone else on his behalf before it can be presented for payment	Presented for payment without any prior acceptance by the maker
The liability of the drawer is secondary and conditional	Liability of a maker of promissory note is primary and absolute.