Skip to content

ACCA Applied Skills · Corporate and Business Law (Global) · Transportation documents and means of payment

Tolven Ltd, an exporter, sells goods to a foreign buyer on a documentary collection basis under which the collecting bank will release the shipping documents only if the buyer accepts a time bill of exchange. Which of the following best describes this arrangement?

This is documents against acceptance. The buyer receives the shipping documents by accepting the time bill and then pays at maturity. It is not documents against payment, and the banks only collect and do not guarantee payment as they would under a letter of credit.

  1. ADocuments against payment, because the buyer must pay immediately to receive the documents
  2. BDocuments against acceptance, because the buyer obtains the documents by accepting the bill and pays on the maturity dateCorrect
  3. CA documentary letter of credit, because the collecting bank guarantees payment to Tolven Ltd

Explanation

In a documentary collection where the documents are released on the buyer's acceptance of a time bill, the arrangement is documents against acceptance (D/A), and payment falls due at maturity. Documents against payment requires payment before release. In a collection the banks act as agents and do not undertake to pay, unlike under a letter of credit.

Did you get it right without looking?

One question tells you little. A timed set on Transportation documents and means of payment shows your real accuracy, how long you take and where you lose marks.

Practise Transportation documents and means of paymentFree diagnostic mock

More Transportation documents and means of payment questions