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CMA Intermediate · Financial Accounting · Bills of Exchange

Which of the following is the drawee's liability on a bill of exchange once the drawee has accepted it?

After acceptance the drawee, now called the acceptor, becomes the principal debtor and must pay the holder on the due date. The drawer is only secondarily liable if the acceptor dishonours the bill, so the drawer does not alone bear liability.

  1. AThe drawee becomes the principal debtor and is liable to pay the holder on maturityCorrect
  2. BThe drawer alone remains liable to the holder
  3. CThe endorsee becomes liable to pay the drawer
  4. DThe notary public becomes liable for payment

Explanation

On acceptance, the drawee (now the acceptor) becomes primarily liable to pay the amount of the bill on maturity. The drawer is only secondarily liable if the acceptor dishonours. The option saying the drawer alone is liable ignores the acceptance.

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