Tag: renewal of the bill

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

Rebate on bills discounted is _______ from interest and discount in the P/L Account .

  1. added

  2. deducted

  3. not deducted

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

Rebate on bills discounted is also known as discount received in advance i.e. discount received but not earned.

In such a situation, the rebate on bills discounts will be deducted from interest and discount in profit & loss account and shown as liability in the balance sheet.

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

__________________ means cancellation of old bill and drawing a new bill.

  1. Dishonour of bill

  2. Honouring of bill

  3. Retirement of bill

  4. Renewal of bill
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When on or before due date drawee finds himself unable to make the payment of the bill, he may request the drawer to cancel the old bill and accept a new one, this process is called renewal of the bill.

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 the renewal of a bill, interest account is ____________ in the books of the drawee.

  1. credited

  2. totalled

  3. debited

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

In the books of Acceptor

1] Entry for Cancellation of Bill:

Bills Payable A/c ……….………….. Dr

To Drawer Personal A/c

2] Entry for part payment in cash:

Drawer’s Personal A/c……………… Dr

To Cash A/c

3] Entry for Interest Paid:

Interest A/c …………………………. Dr

To Cash A/c

4] Interest not paid:

Interest A/c …………………………. Dr

To Drawer’s Personal A/c

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

Which of the following is not correct ?

  1. A joint venture business has a definite life.

  2. No cancellation entry is required when a bill is renewed.

  3. The gain from side of capital assets need not be added to revenue to ascertain the net profit of a business.

  4. If the amount is posted in the wrong account or it is written on the wrong side of an account, it is called error of commission.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When a bill is renewed, the old bill is cancelled and a new one is drawn. Therefore, a cancellation entry is indeed required in the books of both parties.

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

The cancellation of the old bill maturity in return for a new bill (which includes interest) for an extended period is called ________________.

  1. Retiring of a bill

  2. Renewal of a bill

  3. Dishonor of a bill

  4. Rebate on bill
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Sometimes, acceptor of a bill finds himself unable to meet his acceptance on the due date. So he may approach the drawer of the bill before the maturity date arrives, to cancel the old bill and draw a new bill with extended date. The acceptor in this case will of course have to pay interest for the extended period. Thus the cancellation of the old bill maturity in return for a new bill (which includes interest) for an extended period is called "renewal of a bill of exchange".