Bill of exchange is drawn when the purchaser is unable to make cash payment at the time of purchase. It ensures that the payment will be made by the purchaser on the presentation of bill of exchange on due date. Bill of exchange can be discounted from bank to get payment immediately.
Parties to a bill of exchange:
(i) Drawer: Who draws the bill of exchange.
(ii) Drawee: Upon whom the bill of exchange is drawn.
(iii) Payee: Who will receive the payment.
