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

When a bill, which is presented by a bank for payment, is dishonoured, the account to be credited is ___________________.

  1. Drawer's Account

  2. Bank Account

  3. Drawee's Account

  4. Bills Payable Account
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When a bill sent for collection is dishonored, the bank credits the drawer's account (or the collection account) to reflect the reversal of the collection process.

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

Bills sent for collection Rs 1000 dishonored and noting charges paid by drawer Rs 100 then, Cash A/c will be credited by Rs. _____________.

  1. 1000

  2. 1100

  3. 100

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

The noting charges are paid by the drawer in cash. Therefore, the Cash account is credited by the amount of the noting charges, which is 100.

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 dishonour of a bill discounted the drawer gives credit to ________.

  1. Drawee A/c

  2. Noting charges A/c

  3. Bills receivable A/c

  4. Bank A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When a bill of exchange discounted with a bank gets dishonoured at the due date, in that case, the following entry is recorded. L.F. This entry implies that on dishonour the drawee again becomes the debtor of the drawer and bank becomes the creditor of the drawer (due to non-payment by drawee on due date)

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

Mr. X accepted a bill of exchange of $Rs. 1500$ drawn by Y and payable in $3$ months. He got it discounted from bank at $2$% discount. On the due date X failed to pay the bill as he was adjudged insolvent. A final dividend of $0.25$ in a rupee was received from his estate. Find the amount recovered from the estate of X.

  1. $300$

  2. $360$

  3. $375$

  4. $400$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The bill amount is 1500. The dividend is 0.25 in a rupee. 1500 * 0.25 = 375. The discount is irrelevant to the amount recovered from the insolvent estate.

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 dishonourment of a bill received through endorsement, debit is given to ________.

  1. endorser's A/c

  2. payee's A/c

  3. acceptor's A/c

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

When an endorsed bill is dishonored, the drawer must debit the person from whom they received the bill (the endorser) to reverse the transaction.

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

Refusal or inability of the acceptor to pay the amount of bill is termed as _______.

  1. refusal

  2. dishonour

  3. retirement

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

Dishonour of bill happnes when the acceptor of the bill fails to make the payment on the date of maturity of the bill. Hecne, laibility of the acceptor is restored. Entries made for recording dishonour of the bill of exchange are reverse of the entries of recording drawing of the bill.

In the books of drawer:
Acceptor A/c Dr.
             To Bills Receivable A/c
(Bill dishonoured)

In the books of acceptor/drawee:
Bills Payable A/c Dr.
             To Drawer A/c 
(Bill dishonoured)