Definition
The term “After Sight” refers to the wording used in a bill of exchange to indicate that the time for payment will commence from the date on which the drawee is presented with the bill for acceptance. In other words, once the drawee has “seen” the bill, the period specified for payment begins to run. This is in contrast to other terms like “after date” or “at sight,” which trigger the payment period from different points.
Examples
Example 1: International Trade
- A British exporter issues a bill of exchange to an American importer with terms “After Sight, 60 Days.” The importer receives the bill on June 1, 2023, and accepts it on that date. The payment will be due 60 days after the acceptance date, making the due date July 31, 2023.
Example 2: Domestic Business Transaction
- A furniture manufacturer in California issues a bill of exchange to a retailer in New York with the terms “After Sight, 30 Days.” The retailer receives and accepts the bill on January 15, 2023. Payment is due 30 days from January 15, making the due date February 14, 2023.
Frequently Asked Questions (FAQs)
1. What is the difference between “After Sight” and “At Sight”?
- Answer: “After Sight” means the payment period begins when the drawee “sees” or accepts the bill, whereas “At Sight” means payment is due immediately when the drawee sees the bill.
2. Can the “After Sight” period be customized?
- Answer: Yes, the period can be customized based on mutual agreement between the issuer and the drawee. Common periods include 30, 60, or 90 days.
3. What happens if the drawee refuses to accept the bill after sight?
- Answer: If the drawee refuses to accept the bill, not only does the payment period not start, but the bill may also be considered dishonored, leading to potential legal consequences and affecting the drawee’s creditworthiness.
4. Is “After Sight” commonly used in modern transactions?
- Answer: While it is less common than terms like “Net 30” or “Net 60,” “After Sight” is still used in international trade and financial transactions for specific circumstances where visibility and acceptance are crucial.
5. Does “After Sight” apply to other financial instruments?
- Answer: Although primarily used in bills of exchange, similar terms can be found in letters of credit and promissory notes under negotiated terms.
Related Terms
Bill of Exchange
- A 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.
Drawee
- The entity (person or company) that is required to pay the amount specified in the bill of exchange when presented.
After Date
- This term indicates that the payment period starts from the date of issue of the bill. It is a contrasting term to “After Sight.”
At Sight
- This term means that payment is due immediately upon the presentation of the bill to the drawee.
Online References
- Investopedia: Bill of Exchange
- Corporate Finance Institute: Bills of Exchange
- The Balance: Understanding Bills of Exchange
Suggested Books for Further Studies
- “Principles of Corporate Finance” by Richard A. Brealey and Stewart C. Myers
- “International Financial Management” by Jeff Madura
- “Money, Banking, and Financial Markets” by Stephen G. Cecchetti and Kermit L. Schoenholtz
Accounting Basics: “After Sight” Fundamentals Quiz
### What does the term "After Sight" in a bill of exchange specify?
- [ ] The payment is due immediately when the drawee is presented the bill.
- [x] The period for payment starts after the drawee accepts the bill.
- [ ] The payment period begins on the date the bill is issued.
- [ ] The bill can be paid anytime within the year.
> **Explanation:** "After Sight" specifies that the period for the payment starts from the date the drawee accepts the bill after it is presented.
### Which of the following is the primary difference between "After Sight" and "After Date"?
- [ ] "After Date" requires immediate payment.
- [ ] Both terms require immediate payment upon sight.
- [x] "After Sight" begins the payment period upon acceptance, while "After Date" begins on the date of issuance.
- [ ] "After Date" starts the period after the drawee notarizes the bill.
> **Explanation:** "After Sight" starts the payment period after acceptance, whereas "After Date" commences from the issuance date of the bill.
### When does the payment period commence for a bill of exchange marked 'After Sight'?
- [x] From the date the drawee accepts the bill.
- [ ] Immediately upon issuance of the bill.
- [ ] Upon the drawee receiving the bill.
- [ ] When the issuer demands payment.
> **Explanation:** The payment period for an 'After Sight' bill commences from the date the drawee accepts the bill after reviewing it.
### If a bill of exchange reads "After Sight, 90 Days," and the drawee accepts it on May 1st, what is the payment due date?
- [ ] May 31st
- [x] July 30th
- [ ] May 1st
- [ ] August 1st
> **Explanation:** The payment would be due 90 days after May 1st, which would be July 30th (assuming all months are considered typical without any bank holidays affecting the schedule).
### What impact does a refusal to accept a bill of exchange with 'After Sight' terms have?
- [x] The payment period does not start.
- [ ] The period begins from the issuance date instead.
- [ ] The bill is void immediately.
- [ ] The drawee gets automatic default status.
> **Explanation:** If the drawee refuses to accept the bill, the payment period does not commence, and the bill might be treated as dishonored.
### Are 'After Sight' terms applicable to other financial documents?
- [ ] No, it's exclusive to bills of exchange.
- [x] Yes, it can apply to other documents like promissory notes with negotiated terms.
- [ ] It's applicable to employment contracts.
- [ ] Only relevant in verbal agreements.
> **Explanation:** 'After Sight' terms can also apply to other financial documents like promissory notes under mutually agreed conditions.
### How does "After Sight" affect international trade transactions?
- [ ] Forces immediate payment on delivery.
- [x] Provides a clear timeframe for payment after acceptance, aiding cash flow.
- [ ] Creates non-standard payment windows.
- [ ] Eliminates payment to exporters.
> **Explanation:** "After Sight" terms offer a clear period for payment post-acceptance, benefiting cash flow management in international trades.
### Which party is known as the drawee in a bill of exchange?
- [x] The entity required to pay the bill.
- [ ] The party issuing the bill.
- [ ] The intermediate bank.
- [ ] Any involved third party.
> **Explanation:** In a bill of exchange, the drawee is the entity required to pay the specified amount.
### Can the period specified by "After Sight" be indirectly extended?
- [ ] No, it is fixed.
- [x] Yes, by delaying the acceptance of the bill.
- [ ] It depends on the issuing authority.
- [ ] Only if renegotiated formally.
> **Explanation:** The period can be indirectly extended if there's a delay in the drawee accepting the bill, as the timeframe starts post-acceptance.
### In practical scenarios, how are 'After Sight' bills commonly settled in terms of payment?
- [ ] Through exchange for goods.
- [x] Via financial instruments like wire transfers or bank drafts.
- [ ] Direct cash handover.
- [ ] Deposits over time.
> **Explanation:** Typically, 'After Sight' bills are settled using financial instruments like wire transfers or bank drafts ensuring secure transactions.
Thank you for exploring our comprehensive entry on the term “After Sight” and for participating in our detailed quiz designed to enhance your understanding of these essential financial concepts. Keep striving for excellence in your financial knowledge!
