Our present day business transactions are mostly conducted on credit basis. It means that the buyer of goods pays the price of goods purchased within a fixed time after the date of the transaction.
On the other hand the seller has to wait for his money. In many cases the seller cannot afford to do so. He desires payment at the time of selling the goods; but the buyer is not in a position to pay. Then how the matter can be settled so that both the buyer and seller are satisfied? The bill of exchange is one of the means of doing this.
Definition and Explanation of Bill of Exchange:
A bill of exchange has been defined as an unconditional order in writing addressed by one person to another; signed by the person giving it, requiring, the person to whom it is addressed to pay on demand or at a fixed or determinable future time, a certain sum in money to or to the order of a specified person or to bearer.