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Account 3 Marks Question

Bill of Exchange · CBSE STD 11 Commerce (CBSE - English Medium). 18 questions.

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18 questions · timed · auto-graded

Question 13 Marks
What are the different uses available to a holder for dealing with bills receivable?
Answer
Different uses of bills receivable. A party which holds a bill receivable can use it in either of the following ways:
  1. He may keep it till the date of maturity.
  2. He may discount it with the banker before the date of maturity.
  3. He may endorse it to some other party before the date of maturity.
  4. He may send it to his banker for collection.
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Question 23 Marks
Define Bill of Exchange. What are the features of a Bill of Exchange?
Answer
“A Bill of Exchange is an instrument in writing containing an unconditional order signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.” -Section 5 of the Negotiable Instruments Act, 1881
Features of Bill of Exchange:
  1. Bill of Exchange is a written order.
  2. It is drawn and signed by the maker, i.e., drawer of the bill.
  3. It is an unconditional order to a person, i.e., drawee, to pay the specified amount. The drawee must accept it to make it a valuable document.
  4. The specified amount is payable to the person named in the bill or to his order or to the bearer.
  5. It specifies the date by which the amount should be paid.
  6. It is accepted by the drawee to make it a legal document.
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Question 33 Marks
Define a Promissory Note. What are the features of a Promissory Note?
Answer
'A Promissory Note is an instrument in writing (not being a bank note or a 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.' -Section 4 of the Negotiable Instruments Act, 1881
Features of a Promissory Note:
  1. Promissory Note is an unconditional written undertaking to pay the specified amount.
  2. It is drawn and signed by the maker, i.e., promisor.
  3. It specifies the name of the payee, i.e., to whom payment is to be made.
  4. Specified amount is payable to the specified person or to his order or to the bearer.
  5. Date of payment is specified.
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Question 43 Marks
Define a Promissory Note.
Answer
A Promissory Notes an instrument in writing (not being a bank note or a 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.
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Question 53 Marks
Mohan Singh draws a bill on Jagat for ₹ 1,000 payable 2 months after date. Immediately after its acceptance, Mohan Singh sends the bill to his bank for collection. On due date, bank gets the payment. Make the entries in the books of all the parties.
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Question 63 Marks
On Feb. 6, 2017 A sold goods for ₹ 1,00,000 to B. B paid 40% immediately on which Aallowed a cash discount of ₹ 500. For the balance A drew a bill on B payable after 30 days. Due date of bill was a public holiday and the bill was met as per the provisions of Negotiable Instrument Act. Journalise the above transactions in the books of A and B.
Answer


Note: When due date falls on Public holiday (here March 11, 2017), then due date is preceding date i.e. March 10, 2017.
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Question 73 Marks
What is meant by renewal of a bill of exchange?
Answer
When an acceptor of a bill does not have sufficient fund to meet the obligations of the bill on time, he/ she requests the drawer for extension (of time) for payment. If the drawer agrees, then a new bill is drawn which is known as renewal of bill. Generally, a bill is renewed on the condition that the drawee has to pay interest for the extended period.
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Question 83 Marks
What is meant by 'Retiring a bill under rebate'?
Answer
Retiring a Bill under Rebate When the drawee makes the payment of the bill before its due date, it is called retiring the bill. In such a case, the holder of the bill usually allows him discount, technically called “rebate'. Such rebate is calculated at a specified rate per annum for the period the payment is being made too early. The rebate is a gain to the party making the payment and an expense to the party receiving the payment.
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Question 93 Marks
State whether the following expenditure are Capital, Revenue or Deferred Revenue. Give reasons:
  1. Furniture of the book value of ₹ 10,000 were sold off at ₹ 2,500 and new furniture of the value of ₹ 6,000 were acquired, cartage on purchase ₹ 50.
  2. Property purchased for ₹ 20,00,000 and ₹ 1,50,000 paid for its registration and legal fee.
  3. Replacement of old machine by a new one.
  4. Damages paid by a transport company to its passengers injured in an accident.
  5. Erection of shed for parking of vehicles at a cost of ₹ 10 Lac.
Answer
  1. Loss on sale of furniture of ₹ 7,500 is revenue in nature and purchase + cartage ₹ 6,050 will be capitalized.
  2. It is a capital expenditure as the legal fee is paid to acquire the asset.
  3. It is a capital expenditure, as new machinery is purchased and it will result in increasing the earning capacity of the firm.
  4. It is a capital expenditure, as damages paid on accident does not result in increasing the earning capacity of the firm
  5. It is a capital expenditure, as new construction is done and it will result in increasing the earning capacity of the firm.
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Question 103 Marks
Asha sold goods worth ₹ 19,000 to Nisha on March 2, 2016. ₹ 4,000 were paid by Nisha immediately and for the balance she accepted a bill of exchange drawn upon her by Asha payable after three months. Asha discounted the bill immediately with her bank @ 10% p.a. On the due date Nisha dishonoured the bill and the bank paid ₹ 30 as noting charges.
On 5th June, Nisha paid ₹ 3,030 (including noting charges) in cash and accepted a new bill at one month for the amount due to Asha together with interest @ 15% p.a. Record the necessary journal entries in the books of Asha and Nisha.
Answer
Working Notes:
  1. Amount of Discount $=\frac{15,000\ \times\ 10\ \times\ 3}{100\ \times\ 12}=₹\ 375$
  2. Amount of Interest $=\frac{12,000\ \times\ 15\ \times\ 1}{100\ \times\ 12}=₹\ 150$
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Question 113 Marks
Calculate the due dates of the bills in the following cases:
 
Date of the Bills
Period
I.
1st February, 2017
2 months
II.
31st January, 2017
3 months
III.
30th September, 2017
2 months
IV.
30th September, 2017
3 months
V.
29th December, 2017
2 months
VI.
31st December, 2017
2 months
VII.
15th July, 2017
30 days
VIII.
27th January, 2016
1 month
Answer
Due Date of Bill = Date of Bill Drawn + Period + Grace Days
S. No.
Date of Bills Drawn (1)
Period (2)
Grace Days (3)
Due Date (1 + 2 + 3)
I.
February 01, 2017
2 months
3 days
April 04, 2017
II.
January 31, 2017
3 months
3 days
May 03, 2017
III.
September 30, 2017
2 months
3 days
December 03, 2017
IV.
September 30, 2017
3 months
3 days
January 02, 2018
V.
December 29, 2017
2 months
3 days
March 03, 2018
VI.
December 31, 2017
2 months
3 days
March 03, 2018
VII.
July 15, 2017
30 days
3 days
August 17, 2017
VIII.
January 27, 2016
1 month
3 days
March 01, 2016
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Question 123 Marks
Find the due date of a Bill of Exchange dated 9th December, 2018, payable after 45 days.
Answer
25th January, 2019 because 26th January is a public holiday.
Reason: If maturity date falls on a day which is a public holiday or a gazetted holiday, the maturity date of the bill shall be the preceding business day.
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Question 133 Marks
State any four essential features of bill of exchange.
Answer
The four essential features of bills of exchange are:
  1. It must be a written document.
  2. It is an unconditional order to pay by the drawer to the drawee.
  3. The maker of bill must sign it, without which it will not be a legal proof.
  4. The amount to be paid along with its expiry date must be specifically mentioned (both in figures and words) in a bill of exchange.
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Question 143 Marks
A sold goods to B for ₹ 20,000 plus CGST and SGST @ 9% each on credit 3 months. B paid A ₹ 3,600 by cheque and accepted a draft for the balance amount. The draft was endorsed in favour of C, who got the payment on maturity.
Give Journal entries in the books of A.
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Question 163 Marks
What is Noting of a bill of exchange.
Answer
When a bill is presented for payment and acceptor fails to make payment, the bill gets dishonoured. In order to keep a legal proof of dishonour, the bill gets noted by the Notary public (which is approved by the government). In exchange of the Notary service, Notary public charges fees, known as Noting charges. Notary public notes the following facts:
  1. Date and amount of the bill.
  2. Reasons for dishonour.
  3. Amount of Noting charges.
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Question 173 Marks
What Journal entries will be made by the drawer in his books, when:
  1. A Bill is drawn.
  2. A Bill is discounted.
  3. A Bill is dishonoured and noting charges paid.
Answer
  1.  
  1.  
  1.  
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Question 183 Marks
Find out the due dates of the bills in the following cases:
 
Date of the Bills
Period
I.
 29th May, 2017 4 months
II.
 31st March, 2017 1 month
III.
 21st July, 2017 60 days
IV.
 14th May, 2017 90 days
V.
 28th January, 2016 1 month
VI.
 31st January, 2016 1 month
 
Emergency holiday 22nd September
  
Answer
Due Date of Bill = Date of Bill Drawn + Period + Grace Days
S. No.
Date of Bills Drawn (1)
Period (2)
Grace Days (3)
Due Date (1 + 2 + 3)
I.
 May 29, 2017
4 months
3 days
 October 01, 2017
II.
March 31, 2017
1 month
3 days
May 03, 2017
IV.
July 21, 2017
60 days
3 days
September 23, 2017
V.
May 14, 2017
90 days
3 days
August 14, 2017
VI.
January 28, 2016
1 month
3 days
March 02, 2016
VII.
January 31, 2016
1 month
3 days
March 03, 2016
Note: When due date falls on,
  1. Public holiday (here October 2, 2017 and August 15, 2017), then due date is preceding date.
  2. Emergency holiday (here September 22, 2017), then due date is succeeding date.
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