Home FYJC Why Bills Of Exchange? (Basic Concepts, Features)

Why Bills Of Exchange? (Basic Concepts, Features)


Why Bills Of Exchange? (Basic Concepts, Features)


Section 5 of Negotiable Instruments Act 1881 defines the bills of exchange, “As an instrument in writing containing an unconditional order signed by the maker directing a certain person to pay a certain sum of money only to the order of the certain person or to the bearer of the instrument.”

Bills of exchange is of real use only when the other party accepts& signs the “BILL” drawn to him.

For Example –  For example, Sapan Parikh orders Bunty Parikh to pay ₹ 50,000 for 90 days after date and Bunty accepts this order by signing his name, then it will be a bill of exchange.


  •  A bill of exchange is an instrument in writing
  • The bill must be signed by both Drawer & Drawee
  • There should be no condition in the order
  • Amount stated on the bill should be paid on time
  • Payment should be paid by one’s country’s legal currency
  • Order should be for the payment of money only
  • Confirm order should be there to make a payment
  • Amount of the bills of exchange should be definite

Now, there might be question in your mind Why Bills Of Exchange?

Bills Of Exchange makes sure that trade credit is carried out in lawful manner between the parties involved in the agreement. (Parties i.e. Drawer, Drawee).

To make it more easy to understand, It’s just like I purchased 50 chocolates from you on credit. Now, there has to be something in written to ensure that I pay you as a Proof.

That’s it! There’s nothing complicated in it & if you want to look out for examples & much more,

Do watch out this video Here.

Also, if you are a commerce student in 11th or 12th Std, Do watch out our FREE VIDEOS on Accounting. If you have any doubt, write in comments section & will reply to you within 24 hrs.






  1. Thanks for sharing about this fascinating monument and the important history behind it They should have asked bloggers and influencers to help raise the donations by sharing about it on our socials!


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