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CA Foundation · Accounting · Bills of Exchange and Promissory Notes

Kapoor & Sons draw a bill of ₹90,000 on Verma Bros. Verma Bros. accept it. Which of the following correctly identifies the drawer, drawee and the party who becomes the principal debtor on acceptance?

Kapoor & Sons is the drawer because it draws the bill, and Verma Bros. is the drawee. Once Verma Bros. accepts the bill it becomes the acceptor and the principal debtor, primarily liable on maturity. The drawer is liable only secondarily if the acceptor dishonours.

  1. ADrawer: Kapoor & Sons; Drawee: Verma Bros.; Principal debtor: Verma Bros.Correct
  2. BDrawer: Verma Bros.; Drawee: Kapoor & Sons; Principal debtor: Kapoor & Sons
  3. CDrawer: Kapoor & Sons; Drawee: Verma Bros.; Principal debtor: Kapoor & Sons
  4. DDrawer: Verma Bros.; Drawee: Kapoor & Sons; Principal debtor: Verma Bros.

Explanation

The party who draws (writes) the bill is the drawer, here Kapoor & Sons. The party directed to pay is the drawee, Verma Bros. On acceptance, the drawee becomes the acceptor and the principal debtor, so Verma Bros. is primarily liable. Option 3 wrongly makes the drawer the principal debtor; the drawer is only secondarily liable if the acceptor dishonours.

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