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CA Foundation · Accounting · Bills of Exchange and Promissory Notes

An accommodation bill is one that is drawn and accepted:

An accommodation bill is drawn and accepted without any underlying trade transaction, so that one or both parties can raise funds, typically by discounting it with a bank. A bill settling a real credit sale is a trade bill, not an accommodation bill.

  1. Ato settle a genuine trade debt arising from a sale of goods on credit
  2. Bwithout any underlying trade transaction, to help one or both parties raise fundsCorrect
  3. Conly when the drawee is a bank
  4. Donly for the purpose of transferring title to goods

Explanation

An accommodation bill is drawn and accepted without consideration from a genuine sale of goods. Its purpose is to help one or both parties obtain funds, usually by discounting the bill with a bank. A bill that settles a genuine trade debt is a trade bill, so the first option is wrong.

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