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CMA Foundation · Fundamentals of Financial and Cost Accounting · Bills of Exchange

Ravi Traders draws a bill of Rs 40,000 on Suresh Pvt Ltd, which Suresh accepts purely to help Ravi raise funds, with no goods sold between them. What is such a bill called?

Such a bill is an accommodation bill. It is drawn and accepted only to help the drawer raise funds, without any actual sale or purchase of goods between the parties, unlike a trade bill which arises from a genuine credit transaction.

  1. ATrade bill
  2. BAccommodation billCorrect
  3. CDocumentary bill
  4. DForeign bill

Explanation

A bill drawn and accepted without any underlying sale of goods, only to provide financial help, is an accommodation bill. A trade bill arises from a genuine credit sale of goods, which is absent here.

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