Question

The charge made by the bank for paying cash of a bill at an earlier date before maturity of the bill is called ---.

• A. interest charges
• B. discount charges
• C. processing fees
• D. penalty fees

Answer 1

Answer:

B. discount charges

Special Terms Of Bills of Exchange:

1. Renewal of Bills

• The process of drawing and accepting a new bill by adding the interest and cancelling the old bill is called "Renewal of Bill".

2. Retention of Bill

• The Bill can be retained by the drawer till due date and payment realized by him in "retention of Bill"

3. Escrow Bill

• A Bill delivered conditionally or for special purpose is called " Escrow "

4. Domiciliation of Bill of Exchange

• Accepting a bill and making it payable at the bank is called Domiciliation of Bill of exchange 

5. Maturity Date (Due Date)

• The date which the bill will be settled : 3 months, 3 days (Days of Grace)

6. Days of Grace:

• Maturity date means the date on which a bill of exchange falls due for payment.

• The date of maturity is to be calculated in respect of bills which are payable after a specified time.

• Every instrument payable at specified period after date or sight are entitled to 3 days of grace. 

• If the last date of grace period is public holiday, the payment should be made in the preceding date. 

• If the last date of grace period is a sudden holiday, the payment should be made in the succeeding date or next day.

7. Discounting Charge:

• The charge made by the bank for paying cash of a bill at an earlier date before maturity of the bill is called discount charges.

• It is treated as an expense to the drawer.

8. Dishonoured Bill:

• The Debtor (buyer or drawer) could not pay the bill on due date is called dishonoured bill. 

• If the bill is dishonoured, the drawer should give a notice of dishonour to the drawee within reasonable time should be dispatched on the next day of dishonour.