Cheque vs. Bill of Exchange

Difference Between Cheque and Bill of Exchange

Many economic activities continue 24 hours in all parts of the world. All economic activities involve the exchange of goods and services. These goods and services are sold for cash or on credit. In everyday life, it is impractical to issue checks for all transactions that we do and as such we take cash or use our credit cards to make payments to cinema halls, restaurants or buying something on the market. But when it comes to receiving payment for the service we render to our employers or our clients, we tend to receive money in the form of checks that are cashed when we present them in our banks. It is unrealistic to give or receive huge sums of cash which is why people prefer to give or receive checks. In practice, the business benefits of document called negotiable instruments to give and receive money. Cheques and bills of exchange are examples of these negotiable instruments. In this article we will try to discover the differences between these two types of documents, checks and bills of exchange.

Bill of exchange is another important type of negotiable instrument that is used to make or receive payments in business. Let us understand this with an example. Let us suppose that Tom has given a loan of $ 1,000 to John. But Tom must make a payment of $ 1,000 to Roger from which he or taken the goods or services. If Tom does not have cash, he can publish a document directing John to make a payment of $ 1,000 to Roger when Roger asks for it  or after the expiration of a period. This document is considered a bill of exchange which can be further transferred.


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