ACCA Applied Skills · Corporate and Business Law (Global) · Transportation documents and means of payment
A seller holds a bill of exchange accepted by a buyer, payable in 60 days. The seller needs cash now and sells the bill to its bank for less than its face value. What is this process called?
This is discounting the bill. The seller sells the accepted bill to its bank before maturity for less than face value, receiving cash immediately while the bank collects the full amount from the acceptor later. Dishonour and protest relate to non-payment.
- ADiscounting the billCorrect
- BDishonouring the bill
- CProtesting the bill
Explanation
Discounting is selling an accepted bill before maturity to a bank at less than face value, the difference being the bank's charge for early payment. Dishonour is a failure to accept or pay. Protest is a formal certification of dishonour, usually of a foreign bill.
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