Tag: advantages of bill of exchange

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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

______ bears the expenses of noting charges on dishonourment of a bill of exchange.

  1. Drawer

  2. Endorsee

  3. Drawee

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

A bill of exchange should be duly presented for payment on the date of its maturity. The drawee is absolved of his liability if the bill is not duly presented. Proper presentation of the bill means that is should be presented on the date of maturity to the acceptor during business working hours. To establish beyond doubt that the bill was dishonoured, despite its due presentation, it may preferably to be got noted by Noting Public.It may be noted whosoever pays the noting charges, ultimately these have to be borne by the drawee. The drawee is invariably debited in the drawer's books. This is because he is responsible for the dishonour of the bill and hence he has to bear these expenses.


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

A draws a bill on B for Rs. 60,000. A endorsed it to C in full settlement of Rs. 60,500. On due date, the bill was dishonored. Noting charge of Rs. 500 was paid. A wanted to pay the amount to C at 2% discount. The amount to be paid by A to C will be ___________.

  1. Rs. 60,000

  2. Rs. 60,500

  3. Rs. 59,780

  4. Rs. 61,000
Reveal answer Fill a bubble to check yourself
C Correct answer
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

Use the following information .

  1. X and Y enter into a joint venture sharing profits & losses in the ratio of 3:2.
  2. X is entitled to get 1% commission on purchase and Y is entitled to get 5% commission on sales.
  3. X purchased goods for 4,00,000 and sent the same to Y. Supplier allowed a cash discount of 5%.
  4. X drew a bill on Y for an amount equivalent to 80% of the original cost of goods. X got it discounted at 3,00,000.
  5. Y sold 50% goods for 5,00,000 and paid 4,000 towards selling & administration expenses and insurance and 1,000 still outstanding. Y allowed a cash discount of 5% to a customer to whom goods were sold for 2,00,000. Bad Debts amounted to 16,000.
  6. 50% of balance goods are taken over by Y at 60% of Cost.
  7. Remaining Goods were destroyed by fire and insurance claim was received by Y to the extent of 60%.
The profit on Joint Venture is:

  1. 1,80,000.

  2. 1,60,000.

  3. 1,40,000.

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

The profit calculation involves accounting for purchases, discounts, commissions, sales, and losses (bad debts, fire). Following the joint venture accounting steps leads to 1,60,000.

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 noting charges are paid by the bank at the time of the dishonor of the bill, the drawee credits ____________.

  1. bank account

  2. noting charges account

  3. cash A/c

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

When the bank pays noting charges, the drawee owes that amount to the drawer, not the bank. Thus, the drawee credits the drawer's account, not 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

X draws a bill on Y for Rs. 50,000 for 3 months on 1.1.05. The bill is discounted with banker at a discount of Rs. 1000. At maturity the bill returns dishonored. In the books of X, for dishonor, the bank account will be credited by __________.

  1. <span>Rs.&nbsp;</span>49,000

  2. <span>Rs.&nbsp;</span>50,000

  3. <span>Rs.&nbsp;</span>40,100

  4. Rs. 39,800
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Upon dishonor, the bank debits the drawer's account for the full face value of the bill (50,000). The discount is a separate transaction that occurred earlier.

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.