Distinguish between renewal and retirement of a bill of exchange.

Question

Accepted Answer

| Basis | Renewal | Retirement |
|---|---|---|
| When it happens | Before the due date, when the drawee cannot pay on time | Before the due date, when the drawee wants to pay early |
| Who initiates it | The drawee, requesting more time | The drawee, offering to pay ahead of schedule |
| Effect on the old bill | Old bill is cancelled | Old bill is cancelled |
| Fresh bill drawn? | Yes — a new bill is drawn for the extended period | No — the transaction ends with a cash payment, not a new bill |
| Money that changes hands | Interest is charged by the drawer for the extra time allowed, either added to the new bill or settled in cash | A rebate (discount) is allowed by the drawer/holder for the unexpired period, since payment has come in early |
| Direction of the extra amount | Interest flows FROM drawee TO drawer (an expense to the drawee, income to the drawer) | Rebate flows FROM drawer TO drawee (an expense/loss to the drawer, saving to the drawee) |
| Underlying idea | Compensates the drawer for waiting longer | Compensates the drawee for paying sooner | …

Q.Distinguish between renewal and retirement of a bill of exchange.

Concept understanding — Renewal and Retirement of a Bill

Basis	Renewal	Retirement
When it happens	Before the due date, when the drawee cannot pay on time	Before the due date, when the drawee wants to pay early
Who initiates it	The drawee, requesting more time	The drawee, offering to pay ahead of schedule
Effect on the old bill	Old bill is cancelled	Old bill is cancelled
Fresh bill drawn?	Yes — a new bill is drawn for the extended period	No — the transaction ends with a cash payment, not a new bill
Money that changes hands	Interest is charged by the drawer for the extra time allowed, either added to the new bill or settled in cash	A rebate (discount) is allowed by the drawer/holder for the unexpired period, since payment has come in early
Direction of the extra amount	Interest flows FROM drawee TO drawer (an expense to the drawee, income to the drawer)	Rebate flows FROM drawer TO drawee (an expense/loss to the drawer, saving to the drawee)
Underlying idea	Compensates the drawer for waiting longer	Compensates the drawee for paying sooner

Q.Distinguish between renewal and retirement of a bill of exchange.

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