03 September 2010
Bill discounting is one type of finance arrangement,
Suppose A supplied goods to B and raise the invoice but B is having credit period of 3 months, but A wants money immdediatly, so A can drawn a Bill of exchange on B for 3 Months and ask B to accept the same, once the Bill of exchange accpted, A can discount the same bill with bankers or other financiers for a interest of 3 months
So A will get money immediatley and financer will get interest income and B can also enjoy credit period of 3 months
After 3 month B can pay the money to A or financier based on their arrangements
CAclubindia
