Bill of Exchange Test

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Bill of Exchange Test - 41

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Weekly Quiz Competition

Question 1
1 / -0

______ is a person to whom the amount on a bill is payable.

A
Drawer

B
Drawee

C
Payee

D
Endorser

Solution

In simple words, it is always drawn by the creditor on the debtor. The person who draws is known as the 'drawer' and the person on whom it is drawn is known as the 'drawee' or 'acceptor'. The person to whom the amount of money is payable to is known as the 'payee'
Question 2
1 / -0

The following steps are normally taken in an import trade:
1. Indent and letter of credit
2. Ship's report
3. Delivery and customs formalities
4. Exchange and bills of exchange
Correct sequence of these steps is

A
1, 4, 2, 3

B
4, 1, 2, 3

C
4, 1, 3, 2

D
1, 4, 3, 2
Question 3
1 / -0

What is a bill of exchange?

A
It is an instrument written or oral, containing an unconditional undertaking signed by the maker to pay certain sum of money to the bearer.

B
It is an instrument in writing containing a conditional undertaking signed by the maker to pay certain sum of money to the bearer.

C
It is an instrument in writing containing an unconditional undertaking signed by the maker to pay certain sum of money to the bearer.

D
It is an instrument in writing containing an unconditional order signed by the maker to pay certain sum of money to the bearer

Solution

Bill of Exchange can be understood as a written negotiable instrument, that carries an unconditional order to pay a specified sum of money to a designated person or the holder of the instrument, as directed in the instrument by the maker. The bill of exchange is either payable on demand, or after a specified term.
Question 4
1 / -0

Mr.Lava draws a bill on Mr.Kusha on 1st April, 2018 for Rs. 30,000 for 3 months payable after sight. The bill was accepted on 7th April, 2018. Calculate due date for the above bill?

A
7th July, 2018

B
4th July, 2018

C
1st July, 2018

D
10th July, 2018

Solution

In case of a Bills Payable after sight, the legal due date is calculated from the date of acceptance of the bill. In this case the due date will be:
Date of acceptance of the bill: 7th April, 2018
Period: 3 months
Maturity Date: 7th july, 2018
Grace Days: 3 Days
Due Date: 10th July, 2018
Question 5
1 / -0

Which of the given below sentence is proper as to considered to be written in negotiable instruments _____________________.

A
I Promise to pay Mr.B or order Rs. 500

B
Mr. B I. O(owe) you Rs.500

C
I am liable to pay you Rs.500

D
None of the above

Solution

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.
Question 6
1 / -0

Which of the following would be considered a risk-free investment?

A
Gold

B
Equity in a house

C
High-grade corporate bonds

D
Treasury bills

Solution

T-bills are considered the safest possible investment and provide what is referred to as a "risk-free rate of return," based on the credit worthiness of the United States of America. This risk-free rate of return is used as somewhat of a benchmark for rates on municipal bonds, corporate bonds and bank interest.
Question 7
1 / -0

A Promissory Note or Bill of Exchange can be made payable ___________.

A
On demand

B
On a specified date

C
After a specified period - months or days

D
All of the above
Question 8
1 / -0

__________ is not required in a Promissory Note.

A
Acceptance

B
Noting

C
Discounting

D
None of the above

Solution

A Promissory Note is an instrument in writing. It contains an unconditional undertaking or promise, signed by the maker to pay a certain sum of money to a certain person. Unlike, Bills of exchange, there is no need of acceptance of Promissory Notes as here the payer is himself the maker of the note.
Question 9
1 / -0

The cancellation of the old bill maturity in return for a new bill (which includes interest) for an extended period is called ________________.

A
Retiring of a bill

B
Renewal of a bill

C
Dishonor of a bill

D
Rebate on bill

Solution

Sometimes, acceptor of a bill finds himself unable to meet his acceptance on the due date. So he may approach the drawer of the bill before the maturity date arrives, to cancel the old bill and draw a new bill with extended date. The acceptor in this case will of course have to pay interest for the extended period. Thus the cancellation of the old bill maturity in return for a new bill (which includes interest) for an extended period is called "renewal of a bill of exchange".
Question 10
1 / -0

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?

A
Y A/c Dr 10,000
To Bills recievable A/c 10,000

B
Bills Receivable A/c Dr. 10,000
To Y A/c 10,000

C
Bills Payable A/c Dr 10,000
To X A/c Rs. 10,000

D
X A/c Dr. 10,000
To Bills payable A/c 10,000

Solution

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)

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Bill of Exchange Test - 41

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Bill of Exchange Test - 41

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Question 1

Drawer

Drawee

Payee

Endorser

Solution

Question 2

1, 4, 2, 3

4, 1, 2, 3

4, 1, 3, 2

1, 4, 3, 2

Question 3

It is an instrument written or oral, containing an unconditional undertaking signed by the maker to pay certain sum of money to the bearer.

It is an instrument in writing containing a conditional undertaking signed by the maker to pay certain sum of money to the bearer.

It is an instrument in writing containing an unconditional undertaking signed by the maker to pay certain sum of money to the bearer.

It is an instrument in writing containing an unconditional order signed by the maker to pay certain sum of money to the bearer

Solution

Question 4

7th July, 2018

4th July, 2018

1st July, 2018

10th July, 2018

Solution

Question 5

I Promise to pay Mr.B or order Rs. 500

Mr. B I. O(owe) you Rs.500

I am liable to pay you Rs.500

None of the above

Solution

Question 6

Gold

Equity in a house

High-grade corporate bonds

Treasury bills

Solution

Question 7

On demand

On a specified date

After a specified period - months or days

All of the above

Question 8

Acceptance

Noting

Discounting

None of the above

Solution

Question 9

Retiring of a bill

Renewal of a bill

Dishonor of a bill

Rebate on bill

Solution

Question 10

Y A/c Dr 10,000 To Bills recievable A/c 10,000

Bills Receivable A/c Dr. 10,000 To Y A/c 10,000

Bills Payable A/c Dr 10,000 To X A/c Rs. 10,000

X A/c Dr. 10,000 To Bills payable A/c 10,000

Solution

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Y A/c Dr 10,000
To Bills recievable A/c 10,000

Bills Receivable A/c Dr. 10,000
To Y A/c 10,000

Bills Payable A/c Dr 10,000
To X A/c Rs. 10,000

X A/c Dr. 10,000
To Bills payable A/c 10,000