UK Accounting Glossary
A bill of exchange endorsed by a reputable third party acting as a guarantor, as a favour and without compensation.
An accommodation bill is a bill of exchange signed for by a person (the accommodation party) acting as a guarantor. The accommodation party is liable for the bill should the acceptor fail to pay at maturity. Accommodation bills are sometimes also referred to as windbills or windmills.
A type of bill of exchange where the party signing as drawer, acceptor or endorser does not receive value (or consideration) for doing so and accepting primary liability under the bill. Typically, accepting or endorsing a bill without value is done to “accommodate” another party who may use the bill to raise finance, for example, a bankers’ acceptance.
A trade bill arises from an indebtedness arising from purchase of goods or taking of a loan whereas an accommodation bill is drawn and accepted only for providing fund to one of the parties or both the parties of the bill.
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This glossary post was last updated: 27th January 2019.