Tag: book keeping and accountancy

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Questions Related to book keeping and accountancy

Multiple choice book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

A promissory note is a/ an ________.

  1. unconditional order to pay

  2. unconditional undertaking to pay

  3. conditional order to pay

  4. conditional undertaking to pay
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

According to the Negotiable Instruments Act, 1881, a promissory note is defined as an instrument in writing (not being a bank note or a currency note), containing an unconditional undertaking signed by the maker, to pay a certain sum of money only to or to the order of a certain person, or to the bearer of the instrument. However, according to the Reserve Bank of India Act, a promissory note payable to bearer is illegal. Therefore, a promissory note cannot be made payable to the bearer.

Multiple choice book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

X execute a promissory note like I promise to pay B $Rs. 1000$ (Rupees one hundred) payable after three months. This promissory note is ________.

  1. invalid

  2. valid for $Rs. 100$

  3. valid for $Rs. 1000$

  4. valid for the amount decided by the payee
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When there is a discrepancy between the amount in words and the amount in figures, the amount in words prevails. Therefore, the note is valid for 100.

Multiple choice book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

The term Promissory notes is defined in section _______ of the Negotiable Instruments Act.

  1. $3$

  2. $4$

  3. $6$

  4. $8$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

According to section 4 of the Negotiable Instruments Act, 1881, a promissory note is defined as an instrument in writing, containing an unconditional undertaking signed by the maker, to pay a certain sum of money only to or to the order of a certain person, or to the bearer of the instrument. However, according to the Reserve Bank of India Act, a promissory note payable to bearer is illegal. 

Multiple choice book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

A promissory note read like I promise to pay B $RS. 1000$ three months after marriage of C. This promissory note is invalid due to.

  1. Uncertainty of time of payment

  2. Amount being not significant

  3. Insufficiency of time

  4. All the three
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A promissory note must be payable at a time that is certain to happen. Marriage is a contingent event, making the time of payment uncertain.

Multiple choice book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

A promissory note cannot be made payable to bearer.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

 There are only two parties to a Promissory Note, one is the maker or the payer and another one is the payee.The sum should be payable to a certain person. It is not transferable and thus, the amount is not payable to the bearer.

Multiple choice book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

A promissory note can be made payable to bearer.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

 The sum should be payable to a certain person. There are only two parties to a Promissory Note, one is the maker or the payer and another one is the payee. It is not transferable and thus, the amount is not payable to the bearer.

Multiple choice book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

The undertaking contained in a promissory note, to pay a certain sum of money is _________________.

  1. Conditional

  2. Unconditional

  3. May be conditional or unconditional depending upon the circumstances

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A core requirement of a valid promissory note is that the promise to pay must be unconditional.

Multiple choice book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

In a promissory note, the amount of money payable ____________________.

  1. Must be certain

  2. May be certain or uncertain

  3. Is usually uncertain

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A promissory note must be for a definite sum of money. Certainty of the amount is a fundamental legal requirement.

Multiple choice book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

Mr. Amit signs on instrument in the following terms.
(i) " I promise to pay B or order Rs $500$"
(ii) " I promise to pay B Rs$500$, first deducting all other sums which shall be due to him."
(iii) " I promise to pay B Rs$500$ on D's death, provided D leaves one enough to pay that sum"
Which of the following are promissory notes?

  1. Only (i)

  2. Both (i) & (ii)

  3. Both (ii) & (iii)

  4. All of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Only (i) is unconditional and for a certain amount. (ii) involves a deduction (uncertainty), and (iii) is conditional on D's death and D's estate value.