Tag: retirement and renewal of a bill

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Questions Related to retirement and renewal of a 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

__________ of the bill occurs when drawee has funds at disposal and makes a request to drawer or holder to accept the payment before its due date.

  1. Retirement

  2. Renewal

  3. Discounting

  4. Honoring
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Retirement of a bill occurs when the drawee pays the bill before its due date. This is often done to receive a discount or rebate for early payment.

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

When bill is cancelled Drawee passes Following Entry ______________.

  1. Bill Payable A/c Dr

    To Drawer A/c

  2. Bill Payable A/c Dr

    To Cash A/c

  3. Drawer A/c Dr

    To Bill Payable A/c

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

When a bill is cancelled, the liability for the bill is removed from the books. The drawee debits the Bills Payable account to close the liability and credits the Drawer's account to reinstate the debt.

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

  1. Credited

  2. Debited

  3. None of these

  4. Both (a) and (b)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When a bill is renewed, interest is charged to the drawee. For the drawer, this interest is income, and income accounts are credited in the books.

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

Retiring or outgoing partner:

  1. To be liable for firms liabilities.

  2. Not liable for any liabilities of the firm.

  3. Is liable for obligation incurred before his retirement.

  4. Is liable for obligations incurred with his consent only.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A retiring partner remains liable for all debts and obligations incurred by the firm up to the date of their retirement. They are not liable for debts incurred after their departure.

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

When bill is retired , What will be the entry in the books of Drawee ?

  1. Bill payable A/c Dr

    To Cash A/c

    To Discount A/c

  2. Bill payable A/c Dr

    To Cash A/c

    To Rebate A/c

  3. No Entry

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

When a bill is retired, the drawee pays the cash and receives a rebate (discount). The entry is: Bills Payable Dr, To Cash, To Rebate.