Accountancy · Ch 4 — Accounting for Bills of Exchange

Parties to a Promissory Note

4.2.1

There are two parties to a promissory note:

Maker (Drawer) — the person who makes the promissory note and promises to pay the amount stated in it. He is also called the promisor.
Drawee (Payee) — the person in whose favour the note is drawn, to whom payment is to be made. He is called the promisee.

Generally the drawee is also the payee, unless the note states otherwise. For example, if

Ashok Kumar makes a promissory note promising to pay ₹30,000 to Harish Chander, then Ashok

Kumar is the maker/drawer and Harish Chander is the drawee/payee. If Harish Chander endorses

the note to Rohit, Rohit becomes the payee; if he gets it discounted from the bank, the bank

becomes the payee.

Both a bill of exchange and a promissory note are instruments of credit and are alike in many

ways, but they differ on the following basic points:

S.No.	Basis	Bill of Exchange	Promissory Note
1	Drawer	It is drawn by the creditor.	It is drawn by the debtor.
2	Order or promise, and parties	It contains an order to pay; there can be three parties — the drawer, the drawee and the payee.	It contains a promise to pay; there are only two parties — the drawer (maker) and the payee.