Bill of Exchange Test

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Bill of Exchange Test - 23

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Question 1
1 / -0

A promissory note is a/ an ________.

A
unconditional order to pay

B
unconditional undertaking to pay

C
conditional order to pay

D
conditional undertaking to pay

Solution

According to the Negotiable Instruments Act, 1881, a promissory note is defined as 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. However, according to the Reserve Bank of India Act, a promissory note payable to bearer is illegal. Therefore, a promissory note cannot be made payable to the bearer.
Question 2
1 / -0

Drawer of a bill of exchange is generally a _________.

A
creditor

B
debtor

C
both of the above

D
none of the above

Solution

According to the Negotiable Instruments Act, 1881, a bill of exchange is defined as 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. There are three parties to a bill of exchange. Drawer is the maker of the bill of exchange. A seller/creditor who is entitled to receive money from the debtor can draw a bill of exchange upon the buyer/debtor. The drawer after writing the bill of exchange has to sign it as a maker of the bill of exchange.
Question 3
1 / -0

The term Promissory notes is defined in section _______ of the Negotiable Instruments Act.

A
$$3$$

B
$$4$$

C
$$6$$

D
$$8$$

Solution

According to section 4 of the Negotiable Instruments Act, 1881, a promissory note is defined as 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. However, according to the Reserve Bank of India Act, a promissory note payable to bearer is illegal.
Question 4
1 / -0

Drawer means a person who ___________.

A
makes the order

B
accepts it

C
payee

D
all of the above

Solution

Drawer is one of the party to the bill of exchange. Drawer is the maker of the bill of exchange. A seller/creditor who is entitled to receive money from the debtor can draw a bill of exchange upon the buyer/debtor. The drawer after writing the bill of exchange has to sign it a s maker of the bill of exchange.
Question 5
1 / -0

________ is not an essential requirement of a valid bill of exchange.

A
Acceptance

B
Consideration

C
Specific sum payable

D
Writing

Question 6

1 / -0

On acceptance of bill - the drawee, debit which of these accounts?

Drawer's A/c.

Bills Receivable A/c.

Bills Payable A/c.

Endorse A/c.

Solution

In the books of accounts of the drawee (debtor) the following entries of credit purchase & acceptance of bill is passed.

$$1$$. Entry for credit purchase	$$2$$. Entry for acceptance of bill	$$3$$. Net effect of both the entries
Purchase A/c. ------------------Dr.	Drawer (Creditor) A/c. --------------Dr.	Purchase A/c. ------------------Dr.
To Drawer (Creditor) A/c.	To Bills payable A/c.	To Bills payable A/c.

In actual only the $$1$$st & the $$2$$nd entries are passed the $$3$$rd entry shown in the table above is just to understand the net effect of these entries. So when the drawee accepts the bill what he does in the real sense is that he shifts the amount of liability from the Drawer (creditor) A/c. to Bills payable A/c. And so ultimately what is being reflected in the books of the Drawer(creditor) is that his purchase A/c. is debited withe amount of purchases made and the bills payable A/c. is credited, with the same amount and therefore reflecting as a liability instead of creditor A/c. So in order to get this desired result, on acceptance of bill the drawee debits the account of the Drawer(debtor).

Question 7
1 / -0

Inland bills are those bills which are ________ or ________ in India.

A
Drawn, Payable

B
Accepted, Stamped

C
Stamped, Registered

D
None of the Above

Solution

A bill of exchange which is drawn or made in a country and paid in the jurisdiction of the same country is called inland bill. The section 11 of the Negotiable Instruments Act, 1881 provides that the bills of exchange (including cheques/promissory notes) drawn or made in India and made payable in or drawn upon any person resident in India shall be deemed to be an inland bill of exchange (or inland cheques or inland promissory notes as the case may be).
Question 8
1 / -0

Payee of a bill of exchange is a person __________.

A
to whom the bill of exchange is payable

B
who has accepted the bill of exchange

C
a person who draw the bill

D
to whom the bill is endorsed

Solution

Payee is a party to the bill of exchange. Payee is the person to whom the payment is to be made. The drawer of the bill himself will be the payee if he keeps the bill with him till the date of its payment. The payee may change in the following situations:
(a) In case the drawer has got the bill discounted, the person who has discounted the bill will become the payee.
(b) In case the bill is endorsed in favour of a creditor of the drawer, the creditor will become the payee.
Question 9
1 / -0

A foreign bill is generally drawn in __________.

A
duplicate

B
triplicate

C
single copy

D
quadruplicate

Solution

A bill which is not the inland bill is a foreign bill. The following types of bills are called foreign bills of exchange.
1. A bill is drawn outsie India and made payable outside India.
2. A bill drawn outside India and made payable in India.
3. A bill drawn outside India on any person residing outside India.
4. A bill drawn outside India on a person residing in India.
The foreign bills are generally drawn in set of 3 each and each set is termed as a 'via' and dispatched to the drawee in 3 different modes of mail service to avoid delay. A foreign bill is generally drawn in duplicate..
Question 10
1 / -0

Dishonour of a foreign bill requires protest if the law of the place ________ requires.

A
Where it is drawn

B
Where it is payable

C
Where it is accepted

D
Where the payee reside

Solution

A bill which is not an inland bill, is deemed to be a foreign bill.
Example: (1) A bill of exchange drawn in India, on a person residing outside India and made payable outside India.
(2) A bill drawn outside India and made payable in India.
(3) A bill drawn outside India, on a person residing in India.
In case of a bill, foreign bills of exchange must be protested for dishonour when such protest is required by law of the place where the bills are drawn.

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Bill of Exchange Test - 23

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Bill of Exchange Test - 23

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Question 1

unconditional order to pay

unconditional undertaking to pay

conditional order to pay

conditional undertaking to pay

Solution

Question 2

creditor

debtor

both of the above

none of the above

Solution

Question 3

$$3$$

$$4$$

$$6$$

$$8$$

Solution

Question 4

makes the order

accepts it

payee

all of the above

Solution

Question 5

Acceptance

Consideration

Specific sum payable

Writing

Question 6

Drawer's A/c.

Bills Receivable A/c.

Bills Payable A/c.

Endorse A/c.

Solution

Question 7

Drawn, Payable

Accepted, Stamped

Stamped, Registered

None of the Above

Solution

Question 8

to whom the bill of exchange is payable

who has accepted the bill of exchange

a person who draw the bill

to whom the bill is endorsed

Solution

Question 9

duplicate

triplicate

single copy

quadruplicate

Solution

Question 10

Where it is drawn

Where it is payable

Where it is accepted

Where the payee reside

Solution

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