Tag: bills of exchange

Quizzes (8) Questions (115)

Questions Related to bills of exchange

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

When the bill is dishonoured, the account debited in the book of drawee _____________.

  1. Acceptor's account

  2. Creditor's account

  3. Bills payable account

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

In the books of the drawee, when a bill is dishonored, the liability that was previously removed (Bills Payable) must be reinstated. Therefore, the Bills Payable account is debited.

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

If a cheque sent for collection is dishonored, the debit is given to _________.

  1. Suppliers Account

  2. Bank Account

  3. Customers Account

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

At the time of receiving a cheque, customer account was credited, hence if the cheque bounces, a reverse entry has to be passed by debiting the customer account and crediting the bank account.

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

When a bill deposited for collection by the drawer in his bank is dishonoured, drawer has to credit _____________ A/c.

  1. Drawee

  2. Payee

  3. Bank for collection

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

When Bill sent for collection is Dishonored amount receivable from the Bank is cancelled hence Bank for Collection A/c is Credited.

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

Officer appointed by Central Government for noting of dishonour bill.

  1. Central government

  2. Notary public

  3. Judicial committee

  4. State government
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The authority appointed by the Government of India for noting down the reasons of dishonour is called Notary Public Authority.

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

To record noting charges drawer _______ Cash A/c.

  1. Debits

  2. Credits

  3. No effect

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

In the books of a drawer, noting charges are neither credited nor debited. These noting charges are a loss for the drawee. Thus, he needs to debit it in his accounting book and credit cash A/c. The account of noting charges for a drawer is neither a profit nor a loss.

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

On due when Drawee Fails to make the payment of the bill _____________.

  1. Bill is Honored

  2. Bill is Dishonored

  3. Bill is cancelled

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

Dishonour of a bill of exchange occurs when the drawee fails to settle the payment on the date of maturity. When the bill of exchange is dishonoured, the liability of the acceptor is restored (he/she becomes the debtor again).

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

when bill is dishonored  ___________ account is Debited along with Bill payable A/c for recording noting charges.

  1. Noting Charges A/c

  2. Cash A/c

  3. Drawer A/c

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

When a Bill of Exchange is dishonoured, in order to prove the fact, the drawer (or holder) may get the bill of exchange noted and protested through a public official known as “Notary Public” Noting is the recording of the fact of dishonour by a Notary public which becomes an evidence of dishonour.

Journal Entry :-
Noting Charges A/c Dr.
          To Bills Payable A/c.

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

Which of the following is not correct ?

  1. Discount on bills discounted is treated as financial expense and is debited to P and L Account.

  2. For unsold stock lying with the consignee, no entry is made in his books.

  3. Loss of stock is said to be abnormal when such loss is natural and is due to inherent characteristics of the commodities.

  4. The abnormal loss on consignment is credited to Consignment Account.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Abnormal loss is defined as loss due to accidents or unforeseen events, not inherent characteristics of the commodity. Inherent losses are considered normal losses.