Tag: advantages of bill of exchange

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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). 
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

Acceptances received and recorded in bills receivable book are transferred to the ledger ______________.

  1. on the debit side of relevant personal accounts

  2. on the credit side of relevant personal account

  3. <span>either (a) or (b)</span>

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

When a bill is accepted and recorded in the bills receivable book, the acceptor is the person who owes money. In the ledger, the acceptor's personal account must be credited because they are the giver of the bill (a liability or reduction in asset).

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

Which of the following would be considered a risk-free investment?

  1. Gold

  2. Equity in a house

  3. High-grade corporate bonds

  4. Treasury bills
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

T-bills are considered the safest possible investment and provide what is referred to as a "risk-free rate of return," based on the credit worthiness of the United States of America. This risk-free rate of return is used as somewhat of a benchmark for rates on municipal bonds, corporate bonds and bank interest.