Negotiable Instrument

It is a document guaranteeing the payment of a specific amount of money, either on

demand, or at a set time, with the payer named on the document. More specifically, it is
a document contemplated by or consisting of a contract, which promises the payment of
money without condition, which may be paid either on demand or at a future date. The
term can have different meanings, depending on what law is being applied and what
country it is used in and what context it is used in.
Examples

of

negotiable

instruments

include promissory

notes,

bills

of

exchange, banknotes, and cheques.

Because money is promised to be paid, the instrument itself can be used by the holder
in due course as a store of value. The instrument may be transferred to a third party; it
is the holder of the instrument who will ultimately get paid by the payer on the
instrument. Transfers can happen at less than the face value of the instrument and this
is known as discounting; this may happen for example if there is doubt about the payer's
ability to pay.
Due to the nature of the negotiable instrument as a store of value, most countries
passed laws specifically related to negotiable instruments.

BILLS OF EXCHANGE
A non-interest-bearing written order used primarily in international trade that
binds one party to pay a fixed sum of money to another party at a predetermined
future date.
Bills of exchange are similar to checks and promissory notes. They can be drawn
by individuals or banks and are generally transferable by endorsements. The
difference between a promissory note and a bill of exchange is that this product

is transferable and can bind one party to pay a third party that was not involved in
its creation. If these bills are issued by a bank, they can be referred to as bank
drafts. If they are issued by individuals, they can be referred to as trade drafts.

Promissory Note
It is a legal instrument (more particularly, a financial instrument), in which one party
(the maker or issuer) promises in writing to pay a determinate sum of money to the
other (the payee), either at a fixed or determinable future time or on demand of the
payee, under specific terms. If the promissory note is unconditional and readily salable,
it is called a negotiable instrument.[1]
Referred to as a note payable in accounting (as distinguished from accounts payable),
or commonly as just a "note", it is internationally defined by the Convention providing a
uniform law for bills of exchange and promissory notes, although regional variations
exist. Bank note is frequently referred to as a promissory note: a promissory note made
by a bank and payable to bearer on demand.

Cheque (
or c

heck in A

meri

can
English)

It is a document[nb

1]

that orders a bank to pay money from an account. The person

writing the cheque, the drawer, has a transaction banking account (often called a
current, cheque, chequing or checking account) where their money is held. The drawer
writes the various details including the monetary amount, date, and a payee on the
cheque, and signs it, ordering their bank, known as the drawee, to pay that person or
company the amount of money stated.
Cheques are a type of bill of exchange and were developed as a way to make
payments without the need to carry large amounts of money. While paper
money evolved from promissory notes, another form of negotiable instrument, similar to
cheques in that they were originally a written order to pay the given amount to whoever
had it in their possession (the "bearer").

Official Receipts
This

is

hard

copies

of

financial transactions used

by businesses for tax and
accounting purposes. These
documents

include

the

vendor's name, goods sold, purchase price, the date, receipt number and other
pertinent information. Official receipts may be printed or handwritten as long as all
information is included.
Businesses use receipts as official tax documents since they are proof of income
received throughout the year. While invoices are used in accrual-based accounting

methods, they are not used at tax time because invoices only indicate that money is
owed and not that money has been received. Official receipts are used in cash-based
accounting methods.

Delivery Receipt
A document that is typically signed by the receiver of a shipment to indicate that they
have in fact received the item being shipped and have taken possession of it.
Most businesses that transport valuable items via mail or

parcel post will

require

the completion of a signed delivery receipt to make sure that the goods were actually
received by the intended recipient.

Purchase Order (PO)

It is a commercial document and first official offer issued by a buyer to a seller,

indicating types, quantities, and agreed prices for products or services. Acceptance of a
purchase order by a seller forms a contract between the buyer and seller, so no contract
exists until the purchase order is accepted. It is used to control the purchasing of
products and services from external suppliers. [1]
Creating a purchase order is typically the first step of the purchase to pay process in
an ERP system.

Purchase Request
It is a precise document generated by an internal or external organization to notify the
purchasing department of items it needs to order, their quantity, and the time frame that
will be given in the future. It may also contain the authorization to proceed with the
purchase. It is also called Purchase Order Request.
As part of an organization's internal financial controls, the accounting department may
institute a purchase requisition process to help manage requests for purchases.
Requests for the creation of purchase of goods and services are documented and
routed for approval within the organization and then delivered to the accounting group.

Typically

an

account

staff

member

is

assigned
responsibility
purchase

for

order

management,

referred

to

commonly

as

the PO

(purchase

order) Coordinator.
Purchase requests are tracked against both internal departmental budgets as well
as general ledger (GL) categories.

Sales
Invoice
In

financial

accounting is a

tool

that a company uses to communicate to clients about the sums that are due in
exchange for goods that have been sold. A sales invoice should include information
about which items the customer has purchased, the quantities he has bought, discounts
he has received, and the total amount he owes. In addition, a sales invoice should
contain a brief summary of the terms of the transaction, such as the acceptable lag time
between the sale and the payment.

University of Rizal System

Morong, Rizal

Negotiable
Instruments
(Fundamentals of Accounting)

Submittted to :

Prof. Lorena Endozo

Submitted by :
Dealina B. Gomez