Question

Distinguish between trade bill and accommodation bill.

Answer 1

The differences between trade bills and accommodation bills are as follows.

$$\begin{array}{ccc}\text{Basis}& \text{Trade Bills}& \text{Accommodation Bills}\\ \text{Nature}& \text{These bills are based on sales and purchases of goods.}& \text{These bills are drawn to help someone in need of funds.}\\ \text{Consideration}& \text{There is definite consideration for which the bill is}& \text{The acceptor may not receive consideration for his}\\ & \text{accepted.}& \text{acceptance}\\ \text{Extension of credit}& \text{These bill are a form of credit extended to the}& \text{These bill do not have the character of a loan.}\\ & \text{purchaser of goods.}& \\ \text{Proceeds}& \text{When these bills are discounted, the proceeds}& \text{When these bills are discounted, the proceeds may be}\\ & \text{remain with the holder.}& \text{shared by the two parties.}\\ \text{Recovery}& \text{If these bills are dishonoured, the amount may be}& \text{It may not be easy to maintain a suit for recovery of the}\\ & \text{recovered easily through the court.}& \text{amount}\end{array}$$