Bills of Exchange — Concept and Features

A bill of exchange is a written, unconditional order signed by one person directing another person to pay a stated sum of money to a named party, either on demand or at a fixed future date. It is the standard credit instrument used in trade: when goods are sold on credit, the seller can draw a bill on the buyer instead of waiting indefinitely for cash. The Odisha CHSE +2 First-Year Business Mathematics and Statistics syllabus treats this topic on the arithmetic side — how a bill is valued, and how much cash a holder actually receives if the bill is turned into money before it matures.

The three parties to a bill:

• Drawer — the person who makes (writes) and signs the bill; usually the seller/creditor who is owed the money.
• Drawee — the person on whom the bill is drawn and who is ordered to pay; usually the buyer/debtor. Once the drawee signs across the bill agreeing to pay, they are called the acceptor.
• Payee — the person to whom the amount is to be paid. Often the drawer is also the payee, but the bill can name a third party.

Main features:

1. It must be in writing and signed by the drawer.
2. It contains an unconditional order to pay (not a request, and not subject to any condition).
3. The amount payable is certain and is money only.
4. The payee and the time of payment are definite.
5. It must be accepted by the drawee to become legally binding.

The money figure written on the face of the bill — the amount payable at maturity — is called the face value or bill value, and it is the starting point for every calculation in this chapter.