Definitions [4]
Definition: Credit Transactions
A credit transaction is a commercial arrangement in which a customer obtains goods or services with the agreement to make payment at a future date.
Define Bill of Exchange.
According to section 5 of the Negotiable Instruments Act, “a bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of a certain person or to the bearer of the – instrument”.
Define Cheque?
- A cheque is a printed instrument issued by Commercial Banks to its customers for making and receiving payments. [To withdraw self and to pay others]
- The person who draws a cheque is called –“Drawer”.
- The Bank on whom the cheque is drawn is called –“Drawee”.
- The person who receives payment on the cheque is called –“Payee”.
Define Endorsement.
“When the maker or holder of a negotiable instrument signs the name, otherwise that as such maker for the purpose of negotiation, on the back or face thereof, or on a slip of paper annexed thereto.”
Key Points
Key Points: Credit Transactions
- A credit transaction allows customers to receive goods or services now and pay later, based on trust.
- Credit encourages customer spending and helps businesses stay competitive in the market.
- To ensure payment and avoid disputes, businesses use credit instruments like Bills of Exchange and Promissory Notes.
- In India, such credit instruments have existed for a long time and are traditionally called Hundies.
- These written promises are legally valid, accepted by banks, and can be transferred to others as negotiable instruments.
