High School

Bills of exchange are the instrument that provides the framework for enabling the credit transaction between the seller or creditor and buyer or debtor on an agreed basis.
Select one:
A. True
B. False

Answer :

True,Bills of exchange are true instruments facilitating credit transactions between creditors and debtors, serving as transferable orders that acknowledge debt upon acceptance.

Bills of exchange are indeed instruments that provide a framework for credit transactions between a seller (creditor) and a buyer (debtor) based on mutually agreed terms. This is exemplified by a seller who has sold goods and wishes to be paid at a future date; they can draw a bill on the debtor for the amount due, which becomes an acknowledgment of debt when accepted by the debtor. Bills of exchange are advantageous because they save the expense and risk associated with transporting currency, such as the precious metals historically used in trade. For instance, they allow for bartering of goods between international traders without the physical transfer of money, as seen in the trade between New York and Liverpool. Additionally, the bill of exchange is different from a promissory note in that it is an order for payment rather than a promise, with liability structures reflecting these differences.

Bills of exchange have various uses, including simplifying transactions between multiple countries and providing businesses with a tool to obtain credit from financial institutions through discounting these bills. The utility of bills of exchange has been recognized in many countries, though practices may vary, with bills of exchange being more prevalent in places like England and Germany compared to the United States, where promissory notes are more commonly used.