Q.9 (A). Define Credit Instruments.
Q.9 (B). Define the different kinds of
Credit Instruments.
CREDIT
INSTRUMENTS
Credit Instruments are the documents
describing details of credit and debit. Credit Instruments provide a written
means fro future reference describing terms and conditions of any debt and
loan. Credit Instruments may be an order for payment of money to a specified
person or it may be a promise to pay the loan. Credit Instruments generally in
use are cheques, bills of exchanges, bank overdraft etc.
KINDS OF
CREDIT INSTRUMENTS
There are two broad kinds of Credit
Instruments.
1. Negotiable Instruments
According to the negotiable
instruments Act under Section 13-A, A negotiable instrument means a cheque
promissory note and a bill of exchange which are payable to the bearer of the
instrument or the person to be ordered.
Features of
Negotiable Instruments
i. It must be unconditional
ii. It must be in writing
iii. It is payable on demand or the
period for the payment which is determined.
2. Non-Negotiable Instruments
Non-Negotiable Instruments can not be
transferred or the documents which are restricted to transfer by the issuer
e.g. Money Order, Postal Order, Shares Certificate etc. Such documents appears
at the name of the beneficiary and the payments are made only to those persons
to whom the instruments are made payable.
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