Posted in Finance, Accounting and Economics Terms, Total Reads: 293
Definition: Two Name Paper
Two name paper is a type of trade paper. As the name suggests, this paper has two signatures on it. With even one signature it is not a two name paper. Now, an acceptance is a legal agreement on a time draft to pay the specified amount on a given date. As a two name paper, both trade acceptance and bankers’ acceptance are considered. The signatures on the paper are of an endorser and drawer. If the person who has issued the cheque is not able to pay the acceptance, than the accepting bank is liable to pay. It is mostly used as a commercial paper in the US. It is a means of short term financing.
A person issues a cheque in the name of another person along with two name paper. According to the two name paper, the drawer and issuer has their signatures on it. Thus if the persn does not have enough balance to pay the amount mentioned in the cheque, the bank is liable to pay the amount as per the agreement. The issuer can consider it as a short term finance provided by the bank.
• Easy way of short term finance as the amount is issued as the payment demands
• The bank may not be able to recover the money easily as money is issued as per the agreement signed before and not the present situation of the payee.