Negotiable Instruments
27
Lesson 17
Negotiable Instruments
Exchange of goods and services is the basis of every business activity. Goods are bought and
sold for cash as well as on credit. All these transactions require flow of cash either immediately or
after a certain time. In modern business, large number of transactions involving huge sums of
money take place everyday. It is quite inconvenient as well as risky for either party to make and
receive payments in cash. Therefore, it is a common practice for businessmen to make use of
certain documents as means of making payment. Some of these documents are called negotiable
instruments. In this lesson let us learn about these documents.
17.1 Objectives
After studying this lesson, you will be able to:
�� explain the meaning of negotiable instruments;
�� identify the various features of negotiable instruments;
�� describe the various types of negotiable instruments; and
�� differentiate between bills of exchange, promissory notes, and cheques.
17.2 Meaning of Negotiable Instruments
To understand the meaning of negotiable instruments let us take a few examples of day-to-day
business transactions.
Suppose Pitamber, a book publisher has sold books to Prashant for Rs 10,000/- on three months
27
Lesson 17
Negotiable Instruments
Exchange of goods and services is the basis of every business activity. Goods are bought and
sold for cash as well as on credit. All these transactions require flow of cash either immediately or
after a certain time. In modern business, large number of transactions involving huge sums of
money take place everyday. It is quite inconvenient as well as risky for either party to make and
receive payments in cash. Therefore, it is a common practice for businessmen to make use of
certain documents as means of making payment. Some of these documents are called negotiable
instruments. In this lesson let us learn about these documents.
17.1 Objectives
After studying this lesson, you will be able to:
�� explain the meaning of negotiable instruments;
�� identify the various features of negotiable instruments;
�� describe the various types of negotiable instruments; and
�� differentiate between bills of exchange, promissory notes, and cheques.
17.2 Meaning of Negotiable Instruments
To understand the meaning of negotiable instruments let us take a few examples of day-to-day
business transactions.
Suppose Pitamber, a book publisher has sold books to Prashant for Rs 10,000/- on three months
