Tag: bills of exchange

Quizzes (8) Questions (115)

Questions Related to bills of exchange

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

During renewal ________ are not considered as cancellation cost is mutually agreed between both the parties.

  1. interest

  2. payment

  3. noting charges

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

Noting charges are fees paid to a notary public when a bill is dishonored. During a mutual renewal, the bill is not formally dishonored in the legal sense, so noting charges are not incurred.

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

Only ________ can retire the bill before due date.

  1. drawer

  2. bank

  3. drawee

  4. endorse
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Retirement of a bill occurs when the drawee pays the bill amount to the drawer before the due date. The drawee is the party liable to pay, so they are the one who initiates the early settlement.

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

Retirement of bill means __________.

  1. making payment before the due date

  2. cancellation of the bill

  3. sending the bill for collection

  4. endorsing the bill in favour of third party
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Retirement of a bill is a specific accounting term for the early payment of a bill of exchange by the drawee to the drawer, often in exchange for a rebate or discount.

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

When part payment is received drawer debits ________ account.

  1. drawee

  2. cash

  3. bill receivable

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

When a drawee makes a part payment, the drawer receives cash. According to the rules of accounting, the drawer debits the cash account because cash is an asset coming into the business.

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

When drawee approaches the drawer for further extension of bill it is known as __________________.

  1. Renewal of the bill

  2. Retirement of the Bill

  3. Drawing of the Bill

  4. Dishonoring of the Bill
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Renewal of a bill occurs when the drawee cannot pay on the due date and requests the drawer to cancel the old bill and draw a new one for an extended period, usually involving interest.

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

At the time of retirement of a bill a exchange, the drawee credit ___________.

  1. interest A/c

  2. commission A/c

  3. bank A/c

  4. bills receivable A/c
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When a bill is retired, the drawee pays the amount to the drawer. In the drawee's books, the payment is made via bank, so the bank account is credited as it is an outflow of funds.

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

X draws a bill of exchange of Y for $Rs. 20,000$ payable in $4$ months. On the due date Y could not make the payment and requested X to renew a fresh bill for another three months at $12$% interest p.a. The amount of fresh bill will be ____________.

  1. $Rs. 20800$

  2. $Rs. 20400$

  3. $Rs. 22400$

  4. $Rs. 21300$
Reveal answer Fill a bubble to check yourself
A Correct answer