A bill of exchange is the first security that appeared in the life of society. It has long been used as a means of payment and settlement, as well as a means of obtaining a loan, which was provided by the seller to the buyer in a commodity form in the form of a deferred payment. Therefore, a bill is a dual market instrument that secures liabilities on the one hand and debt repayment on the other.
Instructions
Step 1
In the modern sense, a bill is a security, which is a written promissory note certifying the right of one party to pay a certain amount to the other party at a specified place and at a specified time and the right of the other party to demand this payment.
Step 2
A bill of exchange is the most important financial instrument that performs certain functions. A bill of exchange is primarily an instrument of credit. With its help, you can pay for the purchased goods or services, return the loan received, provide a loan. For creditors, the formal and material severity of the bill, its easy transferability and speed of debt collection are attractive.
Step 3
Another function of a bill is the ability to use it as collateral for transactions. In other words, the holder of a bill of exchange has the right to receive money on a bill of exchange earlier than the deadline established in it in two ways: by registering the bill of exchange in a bank or by obtaining a loan secured by a security he has.
Step 4
The bill serves as an instrument of cash settlement. In addition, it is able to speed up settlements, since before the moment of payment, the bill passes through several holders, extinguishes their obligations and thereby reduces the need for real money.
Step 5
A bill of exchange can be simple or transferable. A promissory note is a security that contains an unconditional obligation of the drawer to pay the amount to the drawer or his assignee. Circulation of a promissory note presupposes the presence of two subjects: the drawer and the acquirer (drawer).
Step 6
A bill of exchange, or draft, is a security that contains a written order of the drawer to the payer to pay, within a specified time, a specified amount to the drawer or his legal successor. A bill of exchange binds at least three entities: the drawer, the acquirer of the bill and the payer.
