Help plz

How can a bill of exchange is discounted with bank before its dishonour.if bill is paid and it also has receive discount then how it can be dishonoured.Please explain me in detail

Replies (1)

A bill is drawn on drawee by the drawer which should be paid by the drawee on due date (may be paid before the due date) of the bill.

If drawer needs the amount before such due date he will discount the bill with the banker. The banker will pay the amount on the bill and charges discount as amount is paid before the due date. This process is called Discounting.  

Now since the banker has paid the amount on behalf of the drawee to the drawer, the drawee needs to pay the amount on the bill to the bank on the due date. If drawee is unable to pay the amount to the banker on the due date then the bill is said to be dishonoured.  This is how bill will be dishonoured after discounting.

Regards

Raghuram

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