Tag: dishonour of a bill

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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

X drew a bill on Y for 45,000 for mutual accommodation in the ratio 2:1. Y accepted the bill and returned to X. X discounted the bill for 42,300 and remitted 1/3rd proceeds to Y. Before the due date, not having funds to meet the bill, Y drew a bill on X for 63,000 on the same terms as to mutual accommodation. The second bill was discounted for 61,200. The first bill was honored in the due date and a net amount of 10,800 was remitted to X by Y. The proportionate discount charge on both the bills is to be borne by X is:

  1. 1,800.

  2. 1,500.

  3. 3,000.

  4. 1,200.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

This involves calculating the total discount on two bills and allocating them based on the usage of proceeds. The total discount is (45,000-42,300) + (63,000-61,200) = 2,700 + 1,800 = 4,500. Proportional allocation leads to 3,000.

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 1st Jan, X drew a bill on Y for 3 month for Rs 1,50,000. On 4th March, Y pays the bill to X at 12% p.a. discount, the amount of discount will be?

  1. 1,500

  2. 3,000

  3. 4,500

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

Calculation of discount @12% p.a. for 3 months = 150000 * 12/100 * 3/12

                                                                               = 4500

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

If a bill is dishonored, when presented for payment by third party, the drawer will debit ___________.

  1. acceptor's A/c

  2. third party's A/c

  3. holder's A/c

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

When a bill is dishonored, the drawer must reinstate the debt of the acceptor. Therefore, the drawer debits the acceptor's account.

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 1st Jan, 2017 X sold goods to Y for Rs 10,000 on credit basis. On the same date X drew a bill for Rs 10,000 on Y at two months. Y accepted the bill and returned it to X. On the due date Y could not honor acceptance. What is the journal for recording the dishonor of a bill?

  1. Y A/c&nbsp; &nbsp;Dr&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;10,000<div>&nbsp; &nbsp; To Bills recievable A/c&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;10,000</div>

  2. Bills Receivable A/c Dr.&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;10,000
    &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;To Y A/c&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; 10,000

  3. Bills Payable A/c&nbsp; &nbsp;Dr&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; 10,000
    &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;To X A/c Rs.&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; 10,000

  4. X A/c&nbsp; &nbsp; &nbsp; Dr.&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; 10,000<div>&nbsp; &nbsp; &nbsp;To Bills payable A/c&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; 10,000</div>
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Option A is the correct one.   

The Journal entry for recording the dishonor of a bill will be:

 Y (Debtors) a/c Dr                  10000
        To Bills receivable A/c                  10000
( Being bill dishonored)

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

______ bears the expenses of noting charges on dishonourment of a bill of exchange.

  1. Drawer

  2. Endorsee

  3. Drawee

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

A bill of exchange should be duly presented for payment on the date of its maturity. The drawee is absolved of his liability if the bill is not duly presented. Proper presentation of the bill means that is should be presented on the date of maturity to the acceptor during business working hours. To establish beyond doubt that the bill was dishonoured, despite its due presentation, it may preferably to be got noted by Noting Public.It may be noted whosoever pays the noting charges, ultimately these have to be borne by the drawee. The drawee is invariably debited in the drawer's books. This is because he is responsible for the dishonour of the bill and hence he has to bear these expenses.


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

A draws a bill on B for Rs. 60,000. A endorsed it to C in full settlement of Rs. 60,500. On due date, the bill was dishonored. Noting charge of Rs. 500 was paid. A wanted to pay the amount to C at 2% discount. The amount to be paid by A to C will be ___________.

  1. Rs. 60,000

  2. Rs. 60,500

  3. Rs. 59,780

  4. Rs. 61,000
Reveal answer Fill a bubble to check yourself
C Correct answer
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

Use the following information .

  1. X and Y enter into a joint venture sharing profits & losses in the ratio of 3:2.
  2. X is entitled to get 1% commission on purchase and Y is entitled to get 5% commission on sales.
  3. X purchased goods for 4,00,000 and sent the same to Y. Supplier allowed a cash discount of 5%.
  4. X drew a bill on Y for an amount equivalent to 80% of the original cost of goods. X got it discounted at 3,00,000.
  5. Y sold 50% goods for 5,00,000 and paid 4,000 towards selling & administration expenses and insurance and 1,000 still outstanding. Y allowed a cash discount of 5% to a customer to whom goods were sold for 2,00,000. Bad Debts amounted to 16,000.
  6. 50% of balance goods are taken over by Y at 60% of Cost.
  7. Remaining Goods were destroyed by fire and insurance claim was received by Y to the extent of 60%.
The profit on Joint Venture is:

  1. 1,80,000.

  2. 1,60,000.

  3. 1,40,000.

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

The profit calculation involves accounting for purchases, discounts, commissions, sales, and losses (bad debts, fire). Following the joint venture accounting steps leads to 1,60,000.

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 noting charges are paid by the bank at the time of the dishonor of the bill, the drawee credits ____________.

  1. bank account

  2. noting charges account

  3. cash A/c

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

When the bank pays noting charges, the drawee owes that amount to the drawer, not the bank. Thus, the drawee credits the drawer's account, not the bank account.

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

X draws a bill on Y for Rs. 50,000 for 3 months on 1.1.05. The bill is discounted with banker at a discount of Rs. 1000. At maturity the bill returns dishonored. In the books of X, for dishonor, the bank account will be credited by __________.

  1. <span>Rs.&nbsp;</span>49,000

  2. <span>Rs.&nbsp;</span>50,000

  3. <span>Rs.&nbsp;</span>40,100

  4. Rs. 39,800
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Upon dishonor, the bank debits the drawer's account for the full face value of the bill (50,000). The discount is a separate transaction that occurred earlier.

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 accepted by the acceptor ________.

  1. Bill Payable A/c Dr

    To Drawer A/c

  2. Bill Payable A/c Dr

    To Drawee A/c

  3. Bill Receivable A/c Dr

    To Drawer A/c

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

When the drawee accepts a bill, they incur a liability. They debit 'Bills Payable' (liability increasing) and credit the 'Drawer' (creditor).