Credit instrument - SS2 Commerce Lesson Note

Bill of Exchange: A bill of exchange is a written document that represents an unconditional order to pay a specified amount of money to a designated person or entity. It involves three parties: the drawer (who issues the bill), the drawee (who is obligated to make the payment), and the payee (who receives the payment).

Promissory Note: A promissory note is a written promise made by one party (the maker) to pay a specific sum of money to another party (the payee) within a specified time frame. It serves as a legal instrument that outlines the terms and conditions of the debt, including the repayment schedule and any interest or penalties.

Letter of Credit: A letter of credit is a financial instrument issued by a bank or financial institution that guarantees payment to a beneficiary (usually a seller) on behalf of a buyer. It ensures that the seller will receive payment as long as they fulfill the terms and conditions outlined in the letter of credit, providing security for international trade transactions.

Debentures: Debentures are long-term debt instruments issued by corporations or governments to raise capital. They represent a loan agreement where the issuer promises to repay the principal amount along with periodic interest payments. Debenture holders are creditors of the issuer and have a claim on the issuer's assets.

Vouchers: Vouchers are documents that serve as evidence of a financial transaction. They can be used for various purposes, such as recording and tracking expenses, making payments, or redeeming discounts or benefits. Vouchers can be in the form of physical paper documents, electronic records, or digital codes.