Tag: elements of book keeping and accountancy

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Questions Related to elements of book keeping and accountancy

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

Goods Outward Book is meant for recording all returns of goods which were __________.

  1. sold on credit

  2. purchased on credit

  3. purchased on cash

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

Return of goods, purchased on credit is recorded in the purchase return book. Purchases book shows a debit balance, so the purchases return book will definitely show a credit balance, because purchases return book will definitely show a credit balance, because purchase return is entirely reverse to purchase.  

Multiple choice elements of book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills advantages of bill of exchange

When bill is accepted by the acceptor ________.

  1. Bill Payable A/c Dr

    To Drawer A/c

  2. Bill Payable A/c Dr

    To Drawee A/c

  3. Bill Receivable A/c Dr

    To Drawer A/c

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

When the drawee accepts a bill, they incur a liability. They debit 'Bills Payable' (liability increasing) and credit the 'Drawer' (creditor).

Multiple choice elements of book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills advantages of bill of exchange

Goods costing Rs. 4,00,000 were sent by A to B on consignment. 3/4 of the goods were sold by B at a profit of 20% on sale value. Commission payable to consignee is ordinary commission @ 3% and Del-credere commission @ 2%. A customer did not pay due to insolvency Rs. l,500 and another customer deducted Rs. 2,000 because of dispute regarding quality of.goods. Net amount of commission credited to profit and loss account in the books of consignee will be____.

  1. Rs. 15,200

  2. Rs. 16,500

  3. Rs. 17,250

  4. Rs. 16,750
Reveal answer Fill a bubble to check yourself
C Correct answer
Multiple choice elements of book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills advantages of bill of exchange

When a bill is discharged, the acceptor debits __________.

  1. Creditor's account

  2. Cash account

  3. Bills payable account

  4. Bills receivable account
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A bill is discharged by payment in due course by or on behalf of the drawee or acceptor.  While preparing the journal entry for discharge of bill Bills payable account is debited and Drawer account is credited.

Multiple choice elements of book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills advantages of bill of exchange

When a bill is drawn by A on B, and before the maturity date, B becomes insolvent then in the books of A it is debited to _____________.

  1. Bills Receivable Account

  2. Bank Account

  3. B's Account

  4. Bank for Collection of Bills
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Insolvent is the person whose assets are not sufficient to pay off his liabilities in full. 

In case of insolvency of the acceptor, the holder would get the proportionate amount of what is due from the bill. 
The journal entry for the transaction should be :-
B's A/c              Dr.

     To Bills receivables A/c 

Multiple choice elements of book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills advantages of bill of exchange

When discounted bill is honored drawer passes ________journal entry.

  1. No Entry

  2. Cash A/c Dr

    To Bill Receivable A/c

  3. Cash A/c Dr

    To Bank A/c

  4. Drawee A/c Dr

    To Bill Receivable A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When a bill is discounted, the bank becomes the holder. If the bill is honored, the bank collects the money from the drawee. The drawer has already received the cash (minus discount) and has no further entry to make.

Multiple choice elements of book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills advantages of bill of exchange

Drawee Passes __________ journal entry for bill Retained , Discounted or Pledged.

  1. Cash A/c Dr

    To Bill Payable A/c

  2. Cash A/c Dr

    To Bill Receivable A/c

  3. Bill Payable Dr

    To Drawer A/c

  4. No Entry
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The drawee's liability remains the same regardless of what the drawer does with the bill (retains, discounts, or pledges). The drawee only records the payment upon maturity.

Multiple choice elements of book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills advantages of bill of exchange

When bill sent for collection is honor drawer passes __________journal entry.

  1. Cash A/c Dr

    To Bill Receivable A/c

  2. Bill sent for collection A/c Dr

    To Bill Receivable A/c

  3. Bank A/c Dr

    To bill sent for collection A/c

  4. None
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When a bill sent for collection is honored, the bank collects the cash and credits the 'Bill sent for collection' account, while debiting the 'Bank' account.

Multiple choice elements of book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills advantages of bill of exchange

When Bill is Dishonored ___________ is Debited in drawers books.

  1. Drawee A/c

  2. Endorse A/c

  3. Bank for Collection A/c

  4. Bill Receivable A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When a bill is dishonored, the drawer must reverse the entry. The drawee is once again made a debtor, so the Drawee's account is debited.

Multiple choice elements of book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills advantages of bill of exchange

On acceptance of bill - the drawee, debit which of these accounts?

  1. Drawer's A/c.

  2. Bills Receivable A/c.

  3. Bills Payable A/c.

  4. Endorse A/c.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In the books of accounts of the drawee (debtor) the following entries of credit purchase & acceptance of bill is passed. 

$1$. Entry for credit purchase $2$. Entry for acceptance of bill  $3$. Net effect of both the entries
  Purchase A/c. ------------------Dr.  Drawer (Creditor) A/c. --------------Dr.  Purchase A/c. ------------------Dr.
 To Drawer (Creditor) A/c.  To Bills payable A/c.  To Bills payable A/c.
In actual only the $1$st & the $2$nd entries are passed the $3$rd entry shown in the table above is just to understand the net effect of these entries. So when the drawee accepts the bill what he does in the real sense is that he shifts the amount of liability from  the  Drawer (creditor) A/c. to Bills payable A/c. And so ultimately what is being reflected in the books of the Drawer(creditor) is that his purchase A/c. is debited withe amount of purchases made and the bills payable A/c. is credited, with the same amount and therefore reflecting as a liability instead of creditor A/c. So in order  to get this desired result, on acceptance of bill the drawee debits the account of the Drawer(debtor).