Important MCQ questions for Class 11 Accountancy Chapter 8-Bills of Exchange
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MCQ Questions for Chapter 8-Bills of Exchange class 11 Accountancy (Questions set-1)
Accounting - MCQ on Bill Of Exchange
Class XI
Q.1 Instruments of credit are often used to facilitate
a. online banking.
b. overdraft.
c. trade and commerce.
d. bills of exchange.
Answer:
(c) Trade and commerce
Explanation- Instruments of credit are often used to facilitate trade and commerce. In India, hundis have been in use from time immemorial.
Q.2 Bills of Exchange and Promissory Notes are the examples of instrument of
a. credit.
b. cash.
c. bank.
d. accounts.
Answer:
(a) Credit
Explanation- The instruments of credit are Bills of Exchange and Promissory Notes. They facilitates the credit.
Q.3 An instrument which is in writing containing an unconditional order signed by the maker is known as
a. promissory note.
b. bills of exchange.
c. bills receivables book.
d. bills payable book.
Answer:
(b) Bills of exchange
Explanation- A Bills of Exchange is an instrument in writing containing an unconditional order signed by the maker, directing a certain person to pay a sum of money only to or to the order of, a certain person or to the bearer of the instrument.
Q.4 Bill of exchange is defined under the section
a. 4.
b. 7.
c. 2.
d. 5.
Answer:
(d) 5
Explanation- Bill of Exchange is defined under the Section 5 of the Negotiable Instrument Act.
Q.5 Bill of exchange is defined under the section 5 of the Negotiable Instrument Act established in the year
a. 1881.
b. 1988.
c. 1769.
d. 1924.
Answer:
(a) 1881
Explanation- According to the said section a Bill of Exchange is an instrument that orders another person to pay the stated sum of money to somebody and is accepted by that person.
Q.6 Bill of Exchange contains an order to a person called
a. drawer.
b. banker.
c. payee.
d. drawee.
Answer:
(d) Drawee
Explanation- It must contain an order to a person called ‘Drawee’ to pay a certain sum of money.
Q.7 Maker of the bill is known as
a. drawee.
b. drawer.
c. payee.
d. banker.
Answer:
(b) Drawer
Explanation- Drawer makes aBill and it should be signed by him.
Q.8 How many parties are there to a Bill of Exchange?
a. three.
b. seven.
c. twelve.
d. five.
Answer:
(a) Three
Explanation- A Bill of Exchange has three parties namely:
1. Drawer
2. Drawee
3. Payee
Q.9 The party to whom the amount has to be paid is known as the
a. drawee.
b. banker.
c. payee.
d. payer.
Answer:
(c) Payee
Explanation- The party to whom the amount has to be paid is known as the payee and the person who makes the payment is payor.
Q.10 The order must be unconditional is a
a. objective of bill of exchange.
b. importance of bill of exchange.
c. demerit of bill of exchange.
d. feature of bill of exchange.
Answer:
(d) Feature of bill of exchange
Explanation- The order must be unconditional is one of the feature of bill of exchange.
Q.11 The drawer can also be
a. payee.
b. drawee.
c. payer.
d. banker.
Answer:
(a) Payee
Explanation- The drawer or payee may be the same person if the drawer keeps the bill with him.
Q.12 Bill of exchange can be of-
a. three types.
b. five types.
c. two types.
d. four types.
Answer:
(c) Two types
Explanation- From the accounting point of view, Bills of Exchange are of two types- Trade Bill and Accommodation Bill.
Q.13 Where a Bill of Exchange is drawn and accepted for mutual help, it is called
a. trade bill.
b. accommodation bill.
c. credit bill.
d. retail bill.
Answer:
(b) Accommodation bill
Explanation- Where a Bill of Exchange is drawn and accepted for mutual help, it is called an ‘Accommodation Bill.’ It can be drawn among the friends.
Q.14 If the debit side total is greater, it is called a
a. debit balance.
b. credit balance.
c. zero balance.
d. negative balance.
Answer:
(a) Debit Balance
Explanation- If the debit side total is greater, it is called a Debit Balance.
Q.15 Where a bill of exchange is drawn and accepted for a genuine trade transaction, it is called a
a. accommodation bill.
b. retail bill.
c. credit bill.
d. trade bill.
Answer:
(d) Trade Bill
Explanation- Where a Bill of Exchange is drawn and accepted for a genuine trade transaction, it is called a ‘Trade Bill.’ Otherwise it is an accommodation bill.
Q.16 Purchase and Sale of Goods on Credit is one of the
a. demerit of bill of exchange.
b. advantage of bill of exchange.
c. importance of bill of exchange.
d. feature of bill of exchange.
Answer:
(b) Advantage of bill of exchange
Explanation- With the help of these, goods can be sold and purchased on credit without difficulty since Bills of Exchange contain an unconditional promise to pay.
Q.17 Discounting facility is given under
a. trade bill.
b. promissory notes.
c. bill of exchange.
d. accommodation bill.
Answer:
(c) Bill of exchange
Explanation- Bill of Exchange can be discounted at a bank so that the firm allowing the credit can receive the amount immediately without the debtor having to pay before time.
Q.18 The date of payment is certain under
a. bill of exchange.
b. promissory note.
c. trade bill.
d. accommodation bill.
Answer:
(a) Bill of exchange
Explanation- The date of payment is certain firms which have to pay and receive the amount can thus plan their cash operations.
Q.19 ‘‘An instrument in writing containing an unconditional undertaking signed by the maker to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument.’’ It is the definition for
a. bill of exchange.
b. accommodation bill.
c. promissory note.
d. trade bill.
Answer:
(c) Promissory note
Explanation- ‘‘ A promissory note is an instrument in writing (not being a bank note or currency note) containing an unconditional undertaking signed by the maker to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument.’’
Q.20 Valid Evidence of Debt is an advantage of
a. accommodation bill.
b. bills receivable.
c. bills payable.
d. bill of exchange.
Answer:
(d) Bill of exchange
Explanation- A Bill of Exchange is a written acknowledgement of debt duly signed and stamped. It is a legal document under the Negotiable Instrument Act, 1881.
Q.21 How many parties are there in a case of Promissory note?
a. five.
b. two.
c. three.
d. seven.
Answer:
(b) Two
Explanation- In case of a Promissory Note, there are only two parties. They are:
1. Maker
2. Payee
Q.22 Convenient Means of Remittance in Foreign Trade is the merit of
a.bill of exchange.
b. bills receivable.
c. accommodation bill.
d. trade bill.
Answer:
(a) Bill of exchange
Explanation- In foreign trade, Bills of Exchange are of great assistance in enabling firms to make and receive payment. Thus, there is no risk of carrying the currency to different places.
Q.23 In case of promissory notes, the person who promises to pay the amount is known as
a. maker.
b. payee.
c. drawee.
d. promisor.
Answer:
(a) Maker
Explanation- Maker is a person who makes the note and promises to pay the amount.
Q.24 A person who is to receive the amount is known as
a. maker.
b. drawee .
c. receiver.
d. payee.
Answer:
(d) Payee
Explanation- Payee is a person who is to receive the amount.
Q.25 The promisor must sign the note is the feature of a
a. bill of exchange.
b. promissory note.
c. bills receivable.
d. bills payable.
Answer:
(b) Promissory note
Explanation- The maker or promisor must sign the note is one of the feature of Promissory Note.
Q.26 Promissory note is defined under the section
a. fourth.
b. twenty fourth.
c. thirtieth.
d. sixth.
Answer:
(a) Fourth
Explanation- Promissory Note is defined under the Section 4 of the Negotiable Instrument Act, 1881.
Q.27 The creditor is the drawer in
a. promissory notes.
B. credit sales.
c. bills of exchange.
d. credit purchases.
Answer:
(c) Bills of exchange
Explanation- The creditor is the drawer in bill of exchange. He draws the bill and sent it to the drawee.
Q.28 In case of foreign bills, how many copies of bill of exchange are made?
a. five.
b. three.
c. seven.
d. twelve.
Answer:
(b) Three
Explanation- In case of foreign bills, three copies are made but otherwise only one copy is prepared.
Q.29 The instrument which contains promise to pay is known as
a. promissory note.
b. bill of exchange.
c. bills payable .
d. bills receivable.
Answer:
(a) Promissory note
Explanation- Promissory note contains a promise to pay. Bills of exchange contain order to pay.
Q.30 The maker has the prime liability to pay in
a. accommodation bill.
b. trade bill.
c. bill of exchange.
d. promissory note.
Answer:
(d) Promissory note
Explanation- In promissory note, the maker has the primary liability to pay but when we talk about bill of exchange then in this the liability of the drawer arises only if the acceptor does not pay.
Q.31 A person who acquires a Bill of Exchange in good faith before the date of maturity is called
a. party.
b. bill receiver.
c. creditor.
d. holder in due course.
Answer:
(d) Holder in due course
Explanation- A person who acquires a bill of exchange (including a cheque or a Promissory Note) in good faith, for value and before the date of maturity is called a holder in due course.
Q.32 How many copies are prepared in case of Promissory Note?
a. three.
b. five.
c. one.
d. seven.
Answer:
(c) One
Explanation- Only one copy is prepared whether it is a foreign or a local Promissory Note.
Q.33 The period intervening between the date on which a bill is drawn and that on which it becomes due is called
a. accounting period.
b. term.
c. financial year.
d. maturity period.
Answer:
(b) Term
Explanation- The period intervening between the date on which a bill is drawn and that on which it becomes due is calledthe term, tenor or tenure of the bill.
Q.34 Bills which are payable on presentation to the drawee or acceptor is known as
a. On Demand.
b. Of Demand.
c. After Date.
d. Before Date.
Answer:
(a) On Demand
Explanation- Bills which are drawn ‘On Demand’ and ‘At Sight’ are payable on presentation to the drawee or acceptor.
Q.35 In which case the bill period is counted from the date of drawing of the bill?
a. After Sight.
b. After date.
c. On Sight.
d. Before Date.
Answer:
(b) After Date
Explanation- In case of an after date bill the period is counted from the date of drawing of the bill.
MCQ Questions for Chapter 8-Bills of Exchange class 11 Accountancy (Questions set-2)
Q.36 In which case the validity period of bill is counted from the date of acceptance of the bill?
a. After Date.
b. At Sight.
c. On Date.
d. After Sight.
Answer:
(d) After Sight
Explanation- In case of an after sight bill the validity period is counted from the date of acceptance of the bill.
Q.37 The date on which the payment of the bill is due is called
a. days of grace.
b. bill date.
c. due date.
d. specific date.
Answer:
(c) Due Date
Explanation- The date on which the payment of the bill is due is called the date of maturity or the due date.
Q.38 The days of grace are
a. one.
b. ten.
c. four.
d. three.
Answer:
(d) Three
Explanation- Date of maturity is calculated by adding three days of grace to the actual due date.
Q.39 The extra days of date of maturity are known as
a. due date.
b. days of grace.
c. bill date.
d. extended period.
Answer:
(b) Days of grace
Explanation- It is a practice to add three extra days to the period of the bill. These extra days are called days of grace.
Q.40 Grace is not allowed when the bill is payable
a. After Date.
b. After Sight.
c. On Demand.
d. Before Date.
Answer:
(c) On Demand
Explanation- Grace is not allowed when the bill is payable ‘on demand’, or ‘at sight.’
Q.41 When the period of the bill is stated in days, the calculation of the maturity date will be in
a. year.
b. minutes.
c. months.
d. days.
Answer:
(d) Days
Explanation- When the period of the bill is stated in days, the calculation of the maturity date will be in days (which includes the date of payment but excludes the date of transaction).
Q.42 The holder in due course gets a good title and this is of good value in the transfer of Bills of Exchange from one person to another. Such a transfer is called
a. instruments.
b. negotiation.
c. negotiable.
d. transfer between parties.
Answer:
(b) Negotiation
Explanation- The holder in due course gets a good title and this is of good value in the transfer of Bills of Exchange from one person to another. Such a transfer is called negotiation.
Q.43 The negotiation can also be known as
a. endorsee.
b. endorsement.
c. negotiable.
d. negotiation only.
Answer:
(b) Endorsement
Explanation- The holder in due course gets a good title and this is of good value in the transfer of Bills of Exchange from one person to another. Such a transfer is called negotiation or endorsement.
Q.44 For sale of goods on credit the account which is credited in the Drawer’s Book, is
a. debtor’s personal a/c.
b. bills receivable a/c.
c. purchases a/c.
d. sales a/c.
Answer:
(d) Sales A/c
Explanation- For sale of goods on credit:
Customer’s (Debtor’s) Personal A/c ...Dr.
To Sales A/c
Q.45 On drawing, accepting and receipt of the bill the account which is debited is
a. bills payable a/c.
b. customer’s personal a/c.
c. bills receivable a/c.
d. sales a/c.
Answer:
(c) Bills Receivable A/c
Explanation- On Drawing, accepting and receipt of the bill-
Bills Receivable A/c .......Dr.
To Customer’s Personal A/c
Q.46 For purchase of goods on credit in the books of drawee the account to be debited is
a. creditor’s personal a/c.
b. bills payable a/c.
c. purchases a/c.
d. debtor’s personal a/c.
Answer:
(c) Purchases A/c
Explanation- For purchase of goods on credit:
Purchases A/c .....Dr.
To Supplier’s (Creditor’s) Personal A/c
Q.47 Formula for calculating liability is
a. Assets + Liabilities.
b. Assets - Liabilities.
c. Assets + Capital.
d. Assets - Capital.
Answer:
(d) Assets - Capital
Explanation- Liabilities are debts, they are amounts owed to creditors. Thus, the claims who are not owners are called ‘‘Liabilities.’’
Q.48 When acceptance on bill is given the account which is to be credited is
a. purchases a/c.
b. sales a/c.
c. bills receivable a/c.
d. bills payable a/c.
Answer:
(d) Bills Payable A/c
Explanation- When acceptance on bill is given:
Supplier’s (Creditor’s) A/c ....Dr.
To Bills Payable A/c
Q.49 Formula for calculating capital is
a. Assets + Liabilities.
b. Assets - Liabilities.
c. Assets - Capital.
d. Assets + Capital.
Answer:
(b) Assets - Liabilities
Explanation- Capital is also known as Owner’s Equity, proprietorship and net worth. Owner’s Equity means owner’s claim against the assets of the business. It will always be equal to assets less liabilities.
Q.50 Liabilities plus Capital is equal to
a. Liabilities.
b. Drawings.
c. Assets.
d. Capital.
Answer:
(c) Assets
Explanation- The equation says that the assets of a business are always equal to the claims of owners and the outsiders.
Q.51 On Payment of Bill at maturity the account which is credited is
a. bills payable a/c.
b. creditor’s personal a/c.
c. bills payable a/c.
d. cash a/c.
Answer:
(d) Cash A/c
Explanation- On payment of the bill at maturity. The following journal entry will be passed-
Bills Payable A/c ......Dr.
To Cash (or Bank) A/c
Q.52 A bill given to a creditor is called
a. bills receivable.
b. promissory note.
c. trade bill.
d. bills payable.
Answer:
(d) Bills Payable
Explanation- A bill given to a creditor is called Bills Payable because the debtor commits to pay by giving a bill to the creditor.
Q.53 When the bill is retained till the date of maturity, the drawer receives the money from the drawee and the account which is credited is
a. cash account.
b. bills payable a/c.
c. bills receivable a/c.
d. sales a/c.
Answer:
(c) Bills receivable a/c
Explanation- When the bill is retained till the date of maturity, the drawer receives the money from the drawer. The entry is-
Cash or bank A/c .......Dr.
To Bills Receivable A/c
(With the amount of bill)
Q.54 The total of both the sides of account equal and to write the difference in the side whose total is short is known as
a. totalling of accounts.
b. balancing of accounts.
c. cash accounting.
d. capital accounting.
Answer:
(b) Balancing of account
Explanation- For example, if total of credit side is more than the debit side of any account the difference of amount will be recorded as Balance c/d on debit side and vice versa on the credit side.
Q.55 Balance b/d is known as
a. balance carried down.
b. balance bring down.
c. balance carry down.
d. balance brought down.
Answer:
(d) Balance brought down
Explanation- Assets will show a debit balance. Such accounts will be opened and the relevant amounts written on the debit side as ‘‘To Balance brought down.’’
Q.56 Balance c/d is known as
a. balance carried down.
b. balance bring down.
c. balance carry down.
d. balance brought down.
Answer:
(a) Balance carried down
Explanation- It is normally treated as a closing entry.
Q.57 When the holder of a bill transfers the bill to a third party, the bill is said to have been
a. bill paid.
b. endorsed.
c. bill issued.
d. bill exchanged.
Answer:
(b) Endorsed
Explanation- The term endorsement means the transfer of a bill of exchange or Promissory Note to other person.
Q.58 If the bill is endorsed in favour of a creditor the account which is debited in the books of endorser is
a. bills receivable a/c.
b. creditor a/c.
c. bills payable a/c.
d. debtor a/c.
Answer:
(b) Creditor A/c
Explanation- The journal entry will be-
Creditor or Endorsee A/c ......Dr.
To Bills Receivable A/c
(Being the Bills Receivable endorsed)
Q.59 Examples of assets other than fixed assets are
a. machinery and plant.
b. creditors and short-term loans.
c. long term loans and public deposits.
d. stock and prepaid expenses .
Answer:
(d) Stock and prepaid expenses
Explanation- Current assets are those assets which can be converted into cash within a period of one year.
Q.60 Name the account which will be debited when the bill is receivable from the endorser.
a. endorser a/c.
b. bills payable a/c.
c. cash a/c.
d. bills receivable a/c.
Answer:
(d) Bills Receivable A/c
Explanation- From the endorsee’s viewpoint, the transaction is: Received a bill receivable from the endorser. The journal entry is:
Bills Receivable A/c ....Dr.
To Endorser
Q.61 When a Bill is honoured at maturity, the account which is credited in the books of holder is
a. cash a/c.
b. bills receivable a/c.
c. bills payable a/c.
d. creditor a/c.
Answer:
(b) Bills Receivable A/c
Explanation- The Journal Entry is:
Cash or Bank A/c .....Dr.
To Bills Receivable A/c
Q.62 The person who is entitled to possess the instrument and to receive the due amount is known as
a. holder.
b. holder in due course.
c. endorsee.
d. drawee.
Answer:
(a) Holder
Explanation- Holder is the person entitled to possess the instrument and to receive the due amount.
Q.63 The term used for withdrawing the bill amount from the bank before the instrument becomes due for payment is called
a. endorsement.
b. negotiation.
c. retirement.
d. discounting.
Answer:
(d) Discounting
Explanation- Discounting means withdrawing the bill amount from the bank before the instrument becomes due for payment. The bank charges, Discounting Charges for paying before the due date.
Q.64 When the payment is not made on due date, it is called
a. negotiation.
b. endorsement.
c. discounting.
d. dishonour.
Answer:
(d) Dishonour
Explanation- Dishonour means a situation when the instrument is not paid.
Q.65 When the drawee pays the bill before it becomes due it is called
a. renewal of bill.
b. retirement of bill.
c. accommodation bill.
d. trade bill.
Answer:
(b) Retirement of Bill
Explanation- Retirement of Bill means that the drawee pays the bill before it becomes due for payment. Drawee gets some discount in such a case.
Q.66 Replacement of the instrument with a new instrument with the consent of the holder is termed as
a. retirement of bill.
b. trade bill.
c. renewal of bill.
d. accommodation bill.
Answer:
(c) Renewal of Bill
Explanation- Renewal of Bill means replacement of the instrument with a new instrument with the consent of the holder. It is done when the drawee expresses his inability to make the payment on due date.
Q.67 Transfer of the instrument in the name of another person by which the new person becomes entitled for payment is known as
a. endorsement.
b. negotiation.
c. discounting.
d. retirement of bill.
Answer:
(b) Negotiation
Explanation- Negotiation means transfer of the instrument in the name of another person by which the new person becomes entitled for payment.
Q.68 A Bill of Exchange is renewed generally at the request of the
a. drawee.
b. drawer.
c. bank.
d. endorsee.
Answer:
(a) Drawee
Explanation- A Bill of Exchange is renewed generally at the request of the Drawee because he expresses his inability to make the payment on the due date.
Q.69 A Promissory Note is made by the
a. seller.
b. purchaser.
c. endorsee.
d. drawer.
Answer:
(b) Purchaser
Explanation- A Promissory Note is made by the Purchaser. He promises to pay the seller.
Q.70 If an amount is payable in the future and the amount is certain, it is a
a. asset.
b. provision.
c. depreciation.
d. liability.
Answer:
(d) Liability
Explanation- For example, December’s wages totalling Rs. 20,000 are payable on 31st December. The enterprise will debit Wages Account and credit Wages Outstanding Account as it is a defined liability.
Q.71 If the amount due from debtor is not realised, it is known as
a. bad debts.
b. debtor.
c. overdraft.
d. creditor.
Answer:
(a) Bad debts
Explanation- When a debtor becomes bankrupt, i.e. unable to pay one’s debts, the entire amount due from him is not realised. The unrealised amount is a loss to business, the same is called Bad Debts.
Q.72 Sometime insolvent debtor whose account had been earlier written off as ‘Bad Debts’ pays some amount. This amount so received is known as
a. bad debts.
b. cash withdrawn.
c. bad debts recovered.
d. debtors.
Answer:
(d) Debtors
Explanation- Sometime insolvent debtor whose account had been earlier written off as ‘Bad Debts’ pays some amount.The amount so received is a gain to the business and is known as Bad Debts Recovered.
Q.73 Bills are drawn by
a. debtor.
b. endorsee.
c. payee.
d. creditor.
Answer:
(d) Creditor
Explanation- Bills are drawn by Creditor. He sells goods on credit and is a Creditor in the books of drawee.
Q.74 A Promissory Note is given to a creditor by a
a. creditor.
b. debtor.
c. endorsee.
d. banker.
Answer:
(b) Debtor
Explanation- A Promissory Note is given by a debtor to a creditor.
Q.75 When a bill is dishonoured it becomes
a. invalid.
b. valid.
c. due.
d. paid bill.
Answer:
(a) Invalid
Explanation- A bill becomes invalid when it is dishonoured.
MCQ Questions for Chapter 8-Bills of Exchange class 11 Accountancy (Questions set-3)
Q.76 The debtors who pay to the trader in the stipulated period or shall be recovered for sure are known as
a. debtors.
b. bad debts.
c. old debts.
d. good debts.
Answer:
(d) Good debts
Explanation- Good debtors are those who pay to the trader in the stipulated period or shall be recovered for sure.
Q.77 The maker of a Bill of Exchange is called a
a. drawee.
b. debtor.
c. drawer.
d. creditor.
Answer:
(c) Drawer
Explanation- The person which makes the Bill of Exchange is known as Drawer.
Q.78 The acceptor of a Bill of Exchange is known as
a. drawer.
b. drawee.
c. debtor.
d. creditor.
Answer:
(b) Drawee
Explanation- The person who accepts the Bill is known as Drawee.
Q.79 A Bill of Exchange is an acknowledgement of
a. debtors.
b. promissory note.
c. bills payable.
d. debt.
Answer:
(d) Debt
Explanation- A Bill of Exchange is an acknowledgement of debt. It confirms that the amount is due.
Q.80 Noting charges are ultimately borne by
a. drawee.
b. drawer.
c. creditor.
d. debtor.
Answer:
(a) Drawee
Explanation- Noting charges are ultimately borne by the drawee only as he is responsible for the dishonour of the bill.
Q.81 A Bill of Exchange requires acceptance by
a. drawer.
b. drawee.
c. endorser.
d. endorsee.
Answer:
(c) Drawee.
Explanation- A Bill of Exchange requires acceptance by the drawee. Drawer sent it to the drawee for acceptance.
Q.82 If the date of maturity of a bill is a public holiday then the bill will mature on
a. previous working day.
b. public holiday.
c. 10 of every month.
d. next working day.
Answer:
(d) Next working day
Explanation- If the date of maturity of a bill is on holiday then the bill will mature on preceding working day.
Q.83 When the bill is dishonoured it is registered with a person called
a. state government.
b. notary public.
c. registrar.
d. cashier.
Answer:
(b) Notary Public
Explanation- If the bill is dishonoured, the fact that it is dishonoured and its causes must be established. To establish the fact of a proper presentation and dishonour the bill is generally noted. It is given to a person called the Notary Public.
Q.84 Notary Public is appointed by the
a. Government.
b. Registrar.
c. Director.
d. Court.
Answer:
(a) Government
Explanation- Noting Public is appointed by the Government.
Q.85 The fact of dishonour is noted on the bill and this act is called
a. endorsing.
b. noting.
c. discounting.
d. copying.
Answer:
(b) Noting
Explanation- The Notary Public presents the bill for payment if payment is received it is given to the holder otherwise the fact of dishonour is noted on the face of the bill. This act is called Noting.
Q.86 When the bill is dishonoured on the due date then the account which is debited in the books of drawer is
a. cash a/c.
b. bills receivable a/c.
c. drawee’s a/c.
d. endorsee a/c.
Answer:
(c) Drawee’s A/c
Explanation- When the bill is dishonoured drawer always debits the account of drawee.
Q.87 When the bill is discounted with the bank and dishonoured, the account which is credited in the books of drawer is
a. cash a/c.
b. drawer’s a/c.
c. bills payable a/c.
d. bank a/c.
Answer:
(d) Bank A/c
Explanation- The Journal Entry will be:
Drawee’s A/c ....Dr.
To Bank A/c
(Being passed with the amount of the bill and noting charges)
Q.88 When the bill is endorsed to the endorsee and dishonoured the account which is credited in the books of drawer is
a. drawee’s a/c.
b. endorsee’s a/c.
c. drawer’s a/c.
d. Endorser’s a/c.
Answer:
(b) Endorsee’s A/c
Explanation- The Journal entry in this case will be
Drawee’s A/c ......Dr.
To Endorsee’s A/c
Q.89 When the bill has been sent to the bank for collection and dishonoured, the account which is debited in the books of drawer is
a. bills sent for collection a/c.
b. bank a/c.
c. drawee’s a/c.
d. bills payable a/c .
Answer:
(c) Drawee’s A/c
Explanation- The Journal entry in this case is-
Drawee’s A/c ..........Dr.
To Bills Sent for Collection A/c
To Bank A/c
(With the amount of bill and noting charges)
Q.90 When a person is unable to meet his liabilities he is known as
a. insolvent.
b. incapable.
c. debtor.
d. creditor.
Answer:
(a) Insolvent
Explanation- Insolvency of a person means that he is unable to meet his liabilities. This means that the bill accepted by him will be dishonoured.