CA Foundation Exam > CA Foundation Questions > The purpose of accommodation bill is:a)To fin...
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The purpose of accommodation bill is:
- a)To finance actual purchase or sale of goods
- b)To facilitate trade transmission
- c)When both parties are in need of funds
- d)None of the above
Correct answer is option 'C'. Can you explain this answer?
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The purpose of accommodation bill is:a)To finance actual purchase or s...
The Purpose of Accommodation Bill:
The purpose of an accommodation bill is to provide a means of financing for the actual purchase or sale of goods. It is a financial instrument used to facilitate trade transmission between parties involved in a transaction. Here are the details explaining the purpose of an accommodation bill:
1. Financing Trade:
- An accommodation bill helps in financing the trade by providing a mechanism for the transfer of funds between the buyer and the seller.
- It allows the seller to receive immediate payment for the goods sold, even if the buyer does not have the necessary funds at the time of the transaction.
- Similarly, it enables the buyer to acquire goods upfront, even if they do not have the required funds at the moment.
2. Facilitating Trade Transmission:
- Accommodation bills act as a medium for the transmission of trade by acting as a negotiable instrument.
- They can be transferred between parties through endorsement, allowing the bill to be used as a means of payment or collateral.
- This facilitates the smooth flow of goods and services in the market, as it provides a reliable method for parties to engage in trade transactions.
3. Meeting Financial Needs:
- Accommodation bills are particularly useful when both parties involved in a transaction are in need of funds.
- It allows them to overcome financial constraints and continue with their trade activities.
- By providing a mechanism for credit, it helps parties maintain their cash flow and meet their immediate financial requirements.
4. None of the Above:
- This option is incorrect. The purpose of an accommodation bill is not "None of the above." It serves specific purposes related to trade financing and facilitating transactions.
In conclusion, the purpose of an accommodation bill is to finance the actual purchase or sale of goods, facilitate trade transmission, and provide a means for parties to meet their financial needs. It plays a crucial role in enabling smooth trade transactions and ensuring the flow of goods and services in the market.
The purpose of an accommodation bill is to provide a means of financing for the actual purchase or sale of goods. It is a financial instrument used to facilitate trade transmission between parties involved in a transaction. Here are the details explaining the purpose of an accommodation bill:
1. Financing Trade:
- An accommodation bill helps in financing the trade by providing a mechanism for the transfer of funds between the buyer and the seller.
- It allows the seller to receive immediate payment for the goods sold, even if the buyer does not have the necessary funds at the time of the transaction.
- Similarly, it enables the buyer to acquire goods upfront, even if they do not have the required funds at the moment.
2. Facilitating Trade Transmission:
- Accommodation bills act as a medium for the transmission of trade by acting as a negotiable instrument.
- They can be transferred between parties through endorsement, allowing the bill to be used as a means of payment or collateral.
- This facilitates the smooth flow of goods and services in the market, as it provides a reliable method for parties to engage in trade transactions.
3. Meeting Financial Needs:
- Accommodation bills are particularly useful when both parties involved in a transaction are in need of funds.
- It allows them to overcome financial constraints and continue with their trade activities.
- By providing a mechanism for credit, it helps parties maintain their cash flow and meet their immediate financial requirements.
4. None of the Above:
- This option is incorrect. The purpose of an accommodation bill is not "None of the above." It serves specific purposes related to trade financing and facilitating transactions.
In conclusion, the purpose of an accommodation bill is to finance the actual purchase or sale of goods, facilitate trade transmission, and provide a means for parties to meet their financial needs. It plays a crucial role in enabling smooth trade transactions and ensuring the flow of goods and services in the market.
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The purpose of accommodation bill is:a)To finance actual purchase or sale of goodsb)To facilitate trade transmissionc)When both parties are in need of fundsd)None of the aboveCorrect answer is option 'C'. Can you explain this answer?
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