Discounting of Bills
Discounting of Bills:
When the bill is taken to a bank and the necessary cash is
received, the act is known as discounting. The bank will always deduct a small
sum depending upon the rate of interest and the period of maturity.
Maturity of a promissory note or bill of exchange: "The maturity of a promissory note or bill of exchange is the
date at which it falls due." A promissory note or a bill of exchange may
be payable:-
a)
On demand; or
b) On a specified
date, or
c)
After a specified period.
In the
first case amount is payable on the instrument, when the demand is made. In the
second case, payment can be claimed on a specified date. In the third case,
date of maturity has to be calculated. Every instrument, payable otherwise than
'on demand' is entitled to three days of grace.
The following instruments are not
entitled to 'days of grace'.
(a) A cheque
(b)A bill or
note payable 'at sight' or on presentment' or 'on demand',
(c) A bill or note in which no time is mentioned.
The following instruments are entitled to 'days of grace':
(a) A bill or note
payable on a specified day,
(b) A bill or note payable 'after
sight,
(c) A bill or note payable at a certain
period after date,
(d) A bill or note payable at a
certain period after the happening of a certain event.
Ø Calculation of date of maturity :--
If a
promissory note or bill of exchange is made payable after stated number of
months after date or after sight or after a certain event, it becomes payable
three days after the corresponding date of the month after the stated number of
months. If the month in which the period would terminate has no corresponding
day. The period shall be held to terminate
on the last day of such month.
1. In the above case, the day on which the instrument is
drawn or presented for acceptance or sight or the day on which the event
happens is to be excluded.
Demo Classes of Accounts (CA/CMA/CS/B.Com/11-12th) by CA/CMA Santosh Kumar Sir
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#Discountingofbills
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