Bills of Exchange in Class 11 Accountancy: Parties, Terms, Due Date, and Days of Grace

Bills of Exchange can look formal at first.

There are parties, acceptance, due dates, maturity dates, days of grace, terms like “after date” and “after sight”, and then later, journal entries in the books of the drawer and drawee. It feels like too many new words arriving together.

But the topic becomes much easier when you see the bill as one simple promise arranged through an order:

One person has to receive money, another person has to pay money, and the bill fixes the amount and the date in writing.

Once the parties and date rules are clear, the journal entries become much more logical. This guide will help you understand the foundation first: who is involved, what the main terms mean, how to calculate the due date, and when days of grace are added.

What a Bill of Exchange Means

A bill of exchange is a written document in which one person orders another person to pay a fixed amount of money to a certain person, either on demand or after a fixed period.

In school accountancy language, it usually appears after a credit sale.

Suppose Prachi Traders sells goods to Rohan Stores for Rs. 20,000 on credit. Prachi Traders does not want the payment promise to remain vague. So Prachi Traders writes a bill asking Rohan Stores to pay Rs. 20,000 after a fixed period. Rohan Stores accepts the bill by signing it.

Now the credit transaction has a clear written payment promise.

The bill tells us:

Point	What it fixes
Who has to pay	The person on whom the bill is drawn
Who has to receive	The person named to receive the amount
How much is payable	The fixed amount written in the bill
When it is payable	On demand, at sight, after date, or after sight
Whether the payer has agreed	Acceptance by the drawee

This is why bills of exchange are used in accounting questions. They make the payment date and responsibility clear.

Why Bills of Exchange Are Used

A normal credit sale says, “Pay me later.”

A bill of exchange says, “Pay this fixed amount on this fixed date, and show your acceptance in writing.”

That written acceptance matters because it gives both parties clarity. The seller knows when money is expected. The buyer gets time to arrange payment. The accountant gets a document that can be recorded, held, endorsed, discounted, renewed, or used in later questions.

This is also why the topic connects to many later subtopics, such as discounting of bill, endorsement, bill sent for collection, retirement, renewal, and dishonour.

The Three Main Parties

Most confusion in bills of exchange begins with the parties.

The three main parties are:

Party	Simple meaning	In a credit sale example
Drawer	The person who draws or writes the bill	Seller or creditor
Drawee	The person on whom the bill is drawn	Buyer or debtor
Payee	The person who will receive the money	Usually the drawer, but not always

Let us use one simple transaction:

Prachi sold goods to Rohan for Rs. 20,000 on credit. Prachi drew a bill on Rohan for Rs. 20,000 payable after two months. Rohan accepted it.

In this case:

Party	Person
Drawer	Prachi
Drawee	Rohan before acceptance
Acceptor	Rohan after acceptance
Payee	Prachi, if the bill is payable to Prachi

The drawer is the person who creates the bill.

The drawee is the person asked to pay.

The payee is the person who receives the money.

After the drawee accepts the bill, the drawee is called the acceptor.

Drawer, Drawee, Acceptor, and Payee: The Difference

Students often mix these four words, so let us slow down.

Drawer

The drawer is the maker of the bill.

In most school questions, the drawer is the creditor because the creditor wants written assurance of payment.

If A sells goods to B and draws a bill on B, then A is the drawer.

Drawee

The drawee is the person on whom the bill is drawn.

This person is directed to pay the money.

If A draws a bill on B, then B is the drawee.

Acceptor

The drawee becomes the acceptor only after accepting the bill.

Acceptance usually means signing the bill to show agreement. Before acceptance, B is simply the drawee. After acceptance, B becomes the acceptor.

This small distinction matters because many journal entry questions use the word “acceptor” instead of “drawee”.

Payee

The payee is the person who is to receive the money.

Often, the drawer and payee are the same person. But they can be different.

For example, A draws a bill on B, payable to C. Here:

Party	Person
Drawer	A
Drawee	B
Acceptor	B, after acceptance
Payee	C

The Life of a Bill in Simple Steps

A bill of exchange usually moves through these steps:

1. A credit transaction takes place.
2. The creditor draws a bill on the debtor.
3. The debtor accepts the bill.
4. The bill is held till maturity, or it may be discounted, endorsed, or sent to bank for collection.
5. On maturity, the acceptor pays the amount.
6. If the acceptor does not pay, the bill is dishonoured.

At the beginner level, focus on the first three steps:

Step	What happens
Drawing	The creditor prepares the bill
Acceptance	The debtor agrees to pay by signing
Maturity	The bill reaches the final payment date

Once these steps are clear, the accounting entries make more sense.

Important Terms in a Bill of Exchange

A bill question may use several terms. Do not memorise them as separate words. Connect each term to the story.

Term	Meaning
Date of bill	The date on which the bill is drawn
Term or tenor	The period after which the bill is payable
Amount	The fixed sum payable
Acceptance	The drawee’s written agreement to pay
Due date	The date calculated from the term of the bill
Days of grace	Three extra days usually added to time bills
Maturity date	The final date on which payment is due after adding days of grace
Holder	The person who legally holds the bill and can receive payment
Dishonour	Failure to pay the bill at maturity

The two date words that need special attention are due date and maturity date.

Due Date vs Maturity Date

The due date is the date reached after applying the term of the bill.

The maturity date is the final payment date after adding days of grace, wherever days of grace are allowed.

For most class questions:

Due date + 3 days of grace = Maturity date

For example, if a bill is drawn on 1 April and payable two months after date:

Step	Date
Date of bill	1 April
Add two months	1 June
Add three days of grace	4 June
Maturity date	4 June

Some textbooks and teachers use “due date” casually to mean the final maturity date. In exam questions, read the wording carefully. If the question asks for the maturity date, add days of grace unless the bill is payable on demand, at sight, or on presentment.

What Days of Grace Mean

Days of grace are three extra days added after the period of a bill is complete.

They are called “grace” because the acceptor gets a small additional period before the bill is treated as finally due for payment.

For example:

Bill detail	Date
Bill drawn	10 May
Term	One month after date
Term ends	10 June
Add days of grace	11 June, 12 June, 13 June
Maturity date	13 June

Days of grace are added to time bills, such as:

• one month after date
• two months after sight
• 30 days after date
• 60 days after sight

Days of grace are not added when the bill is payable:

• on demand
• at sight
• on presentment

Those expressions mean the bill is payable when it is presented, so the usual three extra days are not added.

”After Date” and “After Sight”

This is another place where students lose marks.

“After date” means the term is counted from the date of the bill.

“After sight” means the term is counted from the date of acceptance or sight, not from the original drawing date.

Wording	Starting point
Two months after date	Date of drawing the bill
Thirty days after date	Date of drawing the bill
Two months after sight	Date of acceptance
Thirty days after sight	Date of acceptance or presentment for sight

Suppose a bill is drawn on 5 July and accepted on 9 July.

If it is payable one month after date, start from 5 July.

If it is payable one month after sight, start from 9 July.

How to Calculate Maturity When the Term Is in Months

When a bill is payable a certain number of months after date or after sight, count by calendar months.

The basic method is:

1. Start from the correct date.
2. Move to the corresponding date in the ending month.
3. If that month does not have the corresponding date, use the last day of that month.
4. Add three days of grace, if applicable.
5. If the final maturity date falls on a public holiday, shift it to the previous business day.

Let us solve a few examples.

Example 1: Two Months After Date

A bill is drawn on 1 April, payable two months after date.

Step	Date
Start from	1 April
Add two months	1 June
Add three days of grace	4 June
Maturity date	4 June

The answer is 4 June.

Example 2: One Month After Date From 29 January

A bill is drawn on 29 January, payable one month after date.

If February has no 29th day, the term ends on the last day of February.

Step	Date
Start from	29 January
Add one month	Last day of February
Add three days of grace	3 March in a normal year
Maturity date	3 March in a normal year

The key is not to force a date that does not exist.

Example 3: Three Months After Date From 31 August

A bill is drawn on 31 August, payable three months after date.

November has no 31st day, so the term ends on 30 November.

Step	Date
Start from	31 August
Add three months	30 November
Add three days of grace	3 December
Maturity date	3 December

This is a very common type of maturity-date question.

How to Calculate Maturity When the Term Is in Days

When the term is given in days, the date of drawing or acceptance is excluded.

That means you start counting from the next day.

The basic method is:

1. Start from the correct date.
2. Exclude that starting date.
3. Count the number of days given in the term.
4. Add three days of grace, if applicable.
5. Apply the holiday rule if the final maturity date is a public holiday.

Example 4: Thirty Days After Date

A bill is drawn on 5 May, payable 30 days after date.

The date 5 May is excluded.

Step	Calculation
Start date	5 May
Exclude	5 May
Count 30 days from	6 May
30th day falls on	4 June
Add three days of grace	7 June
Maturity date	7 June

The answer is 7 June.

How to Calculate Maturity for “After Sight”

“After sight” questions need one extra check: find the acceptance date.

Suppose a bill is drawn on 10 July and accepted on 14 July. It is payable one month after sight.

The term is counted from 14 July, not from 10 July.

Step	Date
Bill drawn	10 July
Bill accepted	14 July
Add one month from acceptance	14 August
Add three days of grace	17 August
Maturity date	17 August

If a student starts from 10 July, the answer becomes wrong.

What Happens If Maturity Falls on a Holiday

If the maturity date falls on a public holiday, the bill is treated as due on the previous business day.

For example, suppose the calculated maturity date is Sunday, 18 June. The bill will be due on the immediately preceding business day given by the calendar in the question.

In most school questions, a holiday will be clearly mentioned. If no holiday is mentioned, calculate maturity normally.

A Quick Party Identification Practice

Read this:

Anita sold goods to Bhavya for Rs. 15,000. Anita drew a bill on Bhavya for three months, payable to Charu. Bhavya accepted the bill.

Now identify the parties:

Question	Answer
Who is the drawer?	Anita
Who is the drawee before acceptance?	Bhavya
Who is the acceptor after acceptance?	Bhavya
Who is the payee?	Charu
Who has to pay at maturity?	Bhavya
Who receives payment?	Charu

This example shows why payee should not be guessed. The payee is the person named to receive the amount.

A Quick Maturity-Date Practice

Now use a date example:

A bill is drawn on 12 March and accepted on 15 March. It is payable 60 days after sight.

Since the wording is “after sight”, count from the acceptance date.

Step	Calculation
Acceptance date	15 March
Exclude 15 March	Start counting from 16 March
60th day	14 May
Add three days of grace	17 May
Maturity date	17 May

So the bill matures on 17 May.

If the student had counted from 12 March, the answer would be wrong because the bill is after sight, not after date.

Common Mistakes Students Make

Bills of Exchange becomes much easier when you avoid a few common traps.

Mistake	Correct approach
Calling every drawee the acceptor	Drawee becomes acceptor only after acceptance
Assuming drawer and payee are always the same	Check who is named to receive payment
Using drawing date for an after-sight bill	Use acceptance date
Including the starting date in day-based terms	Exclude the starting date
Forgetting days of grace	Add three days for time bills
Adding grace to on-demand or at-sight bills	Do not add grace there
Ignoring the missing date in shorter months	Use the last day of the month
Treating holiday maturity as the next day	Use the previous business day

The best way to prevent mistakes is to write a small working note before the final answer.

For example:

Bill drawn: 5 May
Accepted: 8 May
Term: 2 months after sight
Start from: 8 May
Term ends: 8 July
Add grace: 11 July
Maturity: 11 July

This small note makes your answer clear and reduces careless errors.

How This Helps With Journal Entries Later

Before writing journal entries for bills, you must know who is drawer and who is acceptor.

Why?

Because the same bill appears differently in their books.

For the drawer, the bill is a bill receivable because money is to be received.

For the acceptor, the bill is a bill payable because money is to be paid.

Person	Accountancy view
Drawer	Bills Receivable
Acceptor	Bills Payable

That is why this foundation is important. If the parties are wrong, the journal entries will also become wrong.

A Simple Checklist for Any Bill Question

Use this checklist before solving:

1. Who sold goods or gave value?
2. Who bought goods or owes money?
3. Who drew the bill?
4. Who accepted the bill?
5. Who is the payee?
6. Is the bill after date, after sight, on demand, at sight, or on presentment?
7. What is the correct starting date?
8. Is the term in months or days?
9. Are days of grace allowed?
10. Does the final date fall on a public holiday?

If you answer these ten questions calmly, most bills of exchange questions become manageable.

Frequently Asked Questions

What is a bill of exchange in simple words?

A bill of exchange is a written order in which one person directs another person to pay a fixed amount of money to a certain person. In Accountancy questions, it is often used after a credit sale to make the payment date and responsibility clear.

Who is the drawer of a bill?

The drawer is the person who prepares or draws the bill. In most credit-sale questions, the seller or creditor is the drawer.

Who is the drawee of a bill?

The drawee is the person on whom the bill is drawn. This person is asked to pay the amount.

Is the drawee the same as the acceptor?

Not always. The person is called the drawee before acceptance. Once the drawee accepts the bill by signing it, the drawee becomes the acceptor.

Who is the payee?

The payee is the person who is to receive the money. The payee may be the drawer, but can also be a different person if the bill is made payable to someone else.

What are days of grace?

Days of grace are three extra days added after the term of a time bill is complete. The final date after adding these three days is called the maturity date.

Are days of grace added to every bill?

No. Days of grace are generally added to time bills, such as bills payable after date or after sight. They are not added to bills payable on demand, at sight, or on presentment.

What is the difference between due date and maturity date?

The due date is the date reached after applying the term of the bill. The maturity date is the final date after adding days of grace, if grace days apply.

What does “after date” mean?

“After date” means the term is counted from the date on which the bill is drawn.

What does “after sight” mean?

“After sight” means the term is counted from the date of acceptance or sight. For a bill of exchange, students should usually look for the acceptance date.

How do I count a bill payable 30 days after date?

Exclude the date of the bill, count 30 days from the next day, then add three days of grace if the bill is a time bill.

What if the maturity date falls on a public holiday?

If the maturity date falls on a public holiday, the bill is treated as due on the previous business day. In school questions, apply this only when the holiday information is clearly given.