Noting Charges

A bill of exchange should be duly presented for payment on the date of its maturity; the

drawee is absolved of liability if the bill is not duly presented. Proper presentation means

presenting the bill to the acceptor, during business hours, on the date of maturity.

To establish beyond doubt that a bill was dishonoured despite due presentation, it may be got

noted by a Notary Public. Noting authenticates the fact of dishonour. For this

service the Notary charges a fee called noting charges. The Notary generally notes the

date, fact and reasons of dishonour and the amount of the noting charges.

The entries for noting charges in the drawer's books are:

Whoever pays the noting charges, they are ultimately borne by the drawee — that is why

the drawee is always debited in the drawer's books. In his own books the drawee opens a

Noting Charges Account, debiting Noting Charges and crediting the drawer.

Worked example — noting charges

Azad sold goods for ₹15,000 to Bunty and immediately drew a bill on him on January 1, 2017

payable after three months. On maturity the bill was dishonoured and ₹50 was paid by the

holder as noting charges. The entries in the books of Azad (drawer) under three

circumstances, and in the books of Bunty (acceptor), are as follows.

(i) When Azad retained the bill till maturity — Books of Azad

(Bunty dishonoured his acceptance and ₹50 was paid as noting charges.)

(ii) When Azad discounted the bill with his bank @ 12% p.a. — Books of Azad

(The bank paid the noting charges, so Bunty owes ₹15,050.)

(iii) When Azad endorsed the bill to his creditor Chitra — Books of Azad