Which of the following statements concerning drafts is (are) correct?
I. Drafts require the firm to keep larger balances in its disbursement account.
II. When a draft is transmitted to the firm's bank for collection, the bank must present the draft to the firm for acceptance before payment is made.

Question

Which of the following statements concerning drafts is (are) correct? 
I. Drafts require the firm to keep larger balances in its disbursement account.
II. When a draft is transmitted to the firm's bank for collection, the bank must present the draft to the firm for acceptance before payment is made.

Quizplus · Accepted Answer

Statement II is correct because drafts indeed require the bank to present them to the firm for acceptance before payment can be made. Statement I is incorrect because drafts do not necessarily require a firm to keep larger balances in its disbursement account; this is more related to the firm's management of its cash flow and payment methods.

Which of the Following Statements Concerning Drafts Is (Are) Correct