What is the difference between bill purchase and bill discounting?

The business sells its in-arrear bills to a financial institution, called the factor, which provides cash advance at a discounted rate against such invoice value. This is the primary difference between bill purchase and bill discounting. In one case, you retain the credit control, in another, the factor assumes it.

What is bill purchase?

Purchase Bill is the receipt received by the customer for the product he has purchased . This bill is called Sales Bill by the vendor as he is selling the product and the same is termed as Purchase Bill by the customer as he is purchasing some items from the vendor.

What do you mean by bill discounting?

Bill Discounting is a trade-related activity in which a company’s unpaid invoices which are due to be paid at a future date are sold to a financier (a bank or another financial institution). This process is also called “Invoice Discounting”. This process is governed by the negotiable instrument act, 2010.

What are the types of bill discounting?

Bills are classified into four categories as LCBD (Bill Discounting backed with LC), CBD (Clean Bill Discounting), DBD (Drawee bill discounting) and IBD (Invoice bills discounting).

What is bill purchase in India?

The Invoice/bill is the document which is available in both soft and hard copy. It consists of the details of the supplier/ purchaser along with the name of the Sales/ purchaser, registration no. (VAT, Service Tax, UIN etc.).

Is bill discounting a loan?

Is the bill discounting a loan? Yes. Bill Discounting can be considered to be a type of loan as the bank allows the borrower short term funds against the bill or invoice discounted which have to be repaid to the bank on the due date of the bill.

How do you make a purchase bill?

Purchase bills must contain the below information:

1. Invoice number and invoice date.
2. Customer name and GSTIN.
3. Shipping and billing address.
4. Supplier’s GSTIN.
5. Place of supply.
6. HSN code/SAC code.
7. Product details, i.e. the description of goods sold, quantity, unit, total value.
8. Taxable value.

Is bill discounted a contingent liability?

Liability for bill discounted is a Contingent liability. Contingent liability is a potential liability that may occur, depending on the outcome of an uncertain future event.

What is inland bill purchase?

Definition of inland bill : a bill of exchange that is or on its face purports to be both drawn and payable within the jurisdiction (as country or state) where it is presented — compare foreign bill.

What is difference between negotiation and discounting?

In simple terms, export bill discounting with banks takes place under the shipments where in no Letter of credit is involved. The term export bill negotiation arises when the shipments under Letter of credit basis. After preparing such shipping documents, exporter submits all documents with his authorized dealer bank.

What is bill discounting under LC?

A. LC discounting is a credit facility extended by banks. In this process, the financial institution purchases bills or documents from exporters and provides a loan after discounting the bill amount, i.e., reducing the applicable charges.

Is purchase ledger a debit or credit?

Purchase Ledger Control Account is generally credited. It is credited if its balance increases & debited if its balance decreases.

What is the difference between bill discounting and invoice discounting?

The terms “Bill Discounting” and “Invoice Discounting” are used interchangeably. They both, essentially, mean the same thing. The only difference is that Bill discounting is set up against all “bills of exchange”. and can be used to take a loan for bills due from 30 days to 120 days.

What happens when you discount a bill in a bank?

While discounting a bill, the Bank buys the bill (i.e. Bill of Exchange or Promissory Note) before it is due and credits the value of the bill after a discount charge to the customer’s account.

Is there a difference between bill discounting and Bill maturity?

No there is a difference! In Bill Discounting, the interest is deducted up-front while creating a loan. This is typically a case of USANCE drafts where the maturity can be calculated as per the tenor.

How does bill discounting work as an exporter?

As an exporter, you get money for the completed exports irrespective of it being bill discounting or bill negotiation. Bill Discounting takes place generally for DA bills where there is an USANCE period.

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