Difference between Bills of Exchange and Promissory Note

A promissory note is an unconditional promise in writing given by the buyer (or creditor) to the seller (or debtor) to pay the amount of money specified therein to the seller or to the order of seller or to bearer. Whereas, A Bill of Exchange is something that reduces our credit risk, Let’s understand this concept better with the help of an example; Omkar being the seller sold goods worth Rs 10,000 to Ishaan being the buyer on credit. In the given case, Omkar has sold goods to Ishaan believing that on some future date he will make payment. Now, we can analyze that Omkar is a little skeptical regarding the certainty of receipt and time of such payment. In order to set an exact date of payment and to make his transaction legally valid, Omkar will draw a document in writing. Such a document is called Bills of Exchange. The major points of difference between Bills of Exchange and Promissory Note have been tabulated below.

Difference between Bills of Exchange and Promissory Note

Basis of
Bills of ExchangePromissory Note
Number of PartiesParties involved: a. Drawer b. Drawee c. PayeeParties involved: a. Maker b. Payee
Drawn byCreditor or Drawer or PurchaserA debtor (Maker)
Order / PromiseIt is an order to pay the debt.It is a promise to pay the debt.
Requirement of
It attains validity only when it is accepted by the drawee.It does not require any acceptance.
Liability of drawerThe drawer’s liability is of secondary nature i.e. it will arise only if the acceptor fails to pay.Drawer (maker) Liability is of primary nature.
Drawer and PayeeThe drawer and payee can be the same person.Drawer (maker) and payee cannot be the same person
Noting in case of DishonourCompulsoryNot compulsory
Number of CopiesIf there are foreign bills, three copies are required and in other cases, only one copy is required.A single copy is prepared; whether it is a foreign bill or any other type of bill.
StampingThe stamp is necessary for all types of bills. However, if the bill is payable on demand, then a stamp is not required.The stamp is required for promissory notes.


What are Reserves?

What are Reserves? The amount that is kept out of the profits of an enterprise to meet the future ‘unknown’ or ‘unexpected’ liabilities is known as reserve.

What is Depreciation?

Depreciation is an allocation of the cost of an asset over its useful life and is not a valuation process of the asset. It should be noted…

Types of Reserves

Types of Reserves: The reserves can be broadly bifurcated as revenue reserves and capital reserves. The revenue reserves can be further classified as general reserves and specific reserves.

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