Tag: bill of exchange (trade bill)

Quizzes (3) Questions (81)

Questions Related to bill of exchange (trade bill)

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

To record noting charges drawer _______ Cash A/c.

  1. Debits

  2. Credits

  3. No effect

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

In the books of a drawer, noting charges are neither credited nor debited. These noting charges are a loss for the drawee. Thus, he needs to debit it in his accounting book and credit cash A/c. The account of noting charges for a drawer is neither a profit nor a loss.

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 due when Drawee Fails to make the payment of the bill _____________.

  1. Bill is Honored

  2. Bill is Dishonored

  3. Bill is cancelled

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

Dishonour of a bill of exchange occurs when the drawee fails to settle the payment on the date of maturity. When the bill of exchange is dishonoured, the liability of the acceptor is restored (he/she becomes the debtor again).

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 bill is dishonored  ___________ account is Debited along with Bill payable A/c for recording noting charges.

  1. Noting Charges A/c

  2. Cash A/c

  3. Drawer A/c

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

When a Bill of Exchange is dishonoured, in order to prove the fact, the drawer (or holder) may get the bill of exchange noted and protested through a public official known as “Notary Public” Noting is the recording of the fact of dishonour by a Notary public which becomes an evidence of dishonour.

Journal Entry :-
Noting Charges A/c Dr.
          To Bills Payable A/c.

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

Which of the following is not correct ?

  1. Discount on bills discounted is treated as financial expense and is debited to P and L Account.

  2. For unsold stock lying with the consignee, no entry is made in his books.

  3. Loss of stock is said to be abnormal when such loss is natural and is due to inherent characteristics of the commodities.

  4. The abnormal loss on consignment is credited to Consignment Account.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Abnormal loss is defined as loss due to accidents or unforeseen events, not inherent characteristics of the commodity. Inherent losses are considered normal losses.

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.