Tag: accounting for bills of exchange

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Questions Related to accounting for bills of exchange

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

________ is the person who makes or draws the promissory note.

  1. Maker

  2. Drawee

  3. Payee

  4. None

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

Maker or Drawer is the person who makes or draws the promissory note to pay a certain amount as specified in the promissory note. He is also called the promisor.

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 _________.

  1. Bearer

  2. Owner

  3. Creditor

  4. Debtor
Reveal answer Fill a bubble to check yourself
A 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. The liability of the maker is primary and absolute.

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

Drawee or payee in whose favor the promissory note is drawn is also called as________.

  1. Promisee

  2. Promisor

  3. Creditor

  4. Debtor
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The person to whom the promise to pay a sum of amount is made is called promisee. He is the person in whose favor the promissory note is drawn.

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

Cheque book facility is available for fixed deposit account.

  1. True

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

Fixed deposit accounts are investment vehicles where money is locked for a specific term. They do not provide cheque book facilities, which are reserved for current or savings accounts.

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

Which of these statements is true about a Promisory note?

  1. A Promissory note cannot be made payable to the bearer

  2. A Promissory note is a conditional order to pay

  3. A Promissory note does not require stamping

  4. A Promissory note cannot be dishonoured
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Some key features of promissory notes are as follows,

  • It must be in writing
  • It must contain an unconditional promise to pay.
  • The sum payable must be certain.
  • The promissory notes must be signed by the maker.
  • It must be payable to a certain person,cannot be made payable to the bearer.
  • It should be properly stamped.

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

Which of these is/ are essential for a valid promissory note?

  1. Writing

  2. Proper stamping

  3. Amount to be paid must be certain

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

According to 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. The following are the features of a promissory note :

(1) It must be in writing.
(2) It must contain an unconditional promise to pay.
(3) The sum payable must be certain.
(4) It must be signed by the maker.
(5) The maker must sign it.
(6) It must be payable to a certain person.
(7) It should be properly stamped.

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

How many parties are there in a Promissory note?

  1. $5$

  2. $4$

  3. $3$

  4. $2$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

There are two parties to a promissory note:

(1) Maker or Drawer is the person who makes or draws the promissory note to pay a certain amount as specified in the promissory note. He is also called the promisor.
(2) Drawee or Payee is the person in whose favour the promissory note is drawn. He is called the promisee.

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

________ is not an essential requirement of a valid promissory note?

  1. Acceptance

  2. Unconditonality

  3. Maker and payee

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

According to 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. The following are the features of a promissory note:

1. It must be in writing.
2. It must contain an unconditional promise to pay.
3. The sum payable must be certain.
4. It must be signed by the maker.
Acceptance is not an essential requirement of a valid promissory note.

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.