1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange

You can Download Chapter 8 Bills of Exchange Questions and Answers, Notes, 1st PUC Accountancy Question Bank with Answers Karnataka State Board Solutions help you to revise complete Syllabus and score more marks in your examinations.

Karnataka 1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange

1st PUC Bills of Exchange One Mark Questions and Answers

Question 1.
Define bills of exchange.
Answer:
“An instrument in writing, containing an unconditional order signed by the maker, directing a certain person, to pay on demand or at a fixed or determinable future time, a certain sum of money only, to or to the order of a certain persons, or to the bearer of the instrument”.

Question 2.
Name any two types of commonly used negotiable instruments.
Answer:
The 2 types of negotiable instruments are:

  1. Bills of exchange
  2. Cheque
  3. Promissory note.

Question 3.
Write any two feature of bills of exchange.
Answer:

  1. It must be in written
  2. It must be in order and conditional

Question 4.
Mention the parties involved in bills of exchange.
Answer:
Parties involved in bills of exchange are :

  • Drawer
  • Drawee
  • Payee.

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Question 5.
Who is Drawer?
Answer:
The person who write bill on debtor for amount due called ‘Drawer’.

Question 6.
Who is Drawee?
Answer:
The person who accept the bill written by creditor called Drawee.

Question 7.
Mention the different types of acceptance.
Answer:

  • General acceptance: If the drawee of the bills accepts the bill without any condition then it is called general acceptance.
  • Qualified acceptance: If the drawee of the bill accepts the bill by adding some conditions called qualified acceptance of bills.

Question 8.
How do you record bills of exchange?
Answer:
Bills of exchange record or account as follows :

  • Bills receivable
  • Bills payable

Question 9.
What is bills Payable?
Answer:
A bill which is accepted by a party and for which he has to pay money called bills payable. Bills payable is a liability.

Question 10.
What is bills Receivable?
Answer:
A bill in respect of which a party has to receive money is called bills receivable Bills receivable is a asset.

Question 11.
Differentiate Bills Receivable and Bills Payable.
Answer:

Bills receivable Bills payable
1. It is recorded in the books of drawer 1. It is recorded in the books of drawee
2. It is amount receivable to drawer so it is assets 2. It is amount payable by drawee so it is a liabilities.

Question 12.
What is aceptance in bills of exchange?
Answer:
Acceptance means an concent given by the drawee about accepting of liability of bill by writing ‘Accepted’ with signature.

Question 13.
What is due date or Maturity date of bills?
Answer:
The date on which a bill becomes payable is called ‘due date’ or date of maturity of bill.

Question 14.
What is Meant by Retirement of a Bill?
Answer:
The acceptor of the bill or drawee make payment of bill before the due date is called retirement of a bill.

Question 15.
Write the Meaning of Rebate?
Answer:
It is a reduction in the amount payable on the bill. It is a loss to the drawer or holder of the bill.

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Question 16.
What is Renewal of a Bill?
Answer:
If drawee unable to pay the accepted bill, he my request for draft a new bill with extended period called renewal of bill.

Question 17.
What is Endorsement of Bill?
Answer:
Endorsement of bills means signing on back of the bill with the object of transferring the property of the bills.

Question 18.
Who is Endorsee?
Answer:
The person to whom the bill is endorred is called as ‘Endorree’.

Question 19.
Who is Endorrer?
Answer:
The person who endorce the bill is called ‘Endorree’.

Question 20.
What is Grace of Days?
Answer:
The days give extra or in addition to the bill due date called grace of day. Normaly 3 days considered as grace days.

Question 21.
What is Meant by bill Dishonors?
Answer:
The bill not honour at the due date by drawee to the order or non payment of bill at the maturity period called dishonour of bills.

Question 22.
Write the meaning of Noting of a Bill.
Answer:
A Statement of bill dishonoured with reasons and date of dishonour called noting of bill. It is prepared by notary.

Question 23.
What is Trade Bill?
Answer:
A bill of exchange which is drawn and accepted to settle called trade bill.

Question 24.
Write the Meaning of “Accomodation Bill”.
Answer:
When bill is drawn, accepted or endorsed without any consideration is called as accomondation bill.

Question 25.
What is Bills of exchange?
Answer:
It is a written document, written by creditor or debtor for payment due for certain period.

Question 26.
Write the advantages of bills of exchange.
Answer:
The merits or Advantages of bills exchanges are:

  • A bills fixes the date of payment. The creditor and debtors know the payment date.
  • It is a negotiable instrument. It can be transferred to others.
  • The debtor will get fixed period of time for payment.

Question 27.
What is honour of Bills?
Answer:
The bill honoured or paid at the due date of the bill by drawee called honour of bill.

Question 28.
What is Discount of a Bill?
Answer:
The holder of a bill, sells the bill to other for immediate can need called discounting of bills. Normally the broker or banker deducts certain amounts as discounts.

Question 29.
What is Discounts?
Answer:
The discount is a amount deducted or retained out of bill by banker or broker at the time of bill discounting called discounts.

Question 30.
What is Protesting of a Bill?
Answer:
The certificate issued by the notary public certify in the bill dishonour called protesting of bill.

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1st PUC Bills of Exchange Additional Questions And Answers

Question 1.
Differentiate bills of exchange and promissory note.
Answer:

Bills of Exchange Promissory Note.
It is drawn by a creditor. It is drawn by debtor.
There are three parties involved namely drawer, drawee and payee. There are two parties involved, namely Promissor and payee.

Question 2.
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.

Question 3.
State the three parties involved in a bill of exchange.
Answer:
The following three parties are involved in a bill of exchange.

  1. Drawer who makes the bill
  2. Drawee who accepts the bill
  3. Payee who receives the payment

Question 4.
What is meant by maturity of a Bill of exchange?
Answer:
Maturity of a bill means a date on which the bill is due for payment. Maturity date of the bill differs on the basis of the terms and conditions of the bill. There are three types of bill, viz. after date bill, after sight bill.

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Question 5.
What is meant by dishonor of a bill of exchange?
Answer:
Dishonour of a bill happens when the acceptor of the bill fails to make the payment of the date of maturity of the bill. Hence, liability of the acceptor is restored.

Question 6.
Name the parties to a promissory note
Answer:
The parties to a promissory note are given below.
Promissor, who makes the note and undertakes to pay the amount of promissory note.
Payee, who receives the payment.

Question 7.
What is meant by’acceptance of a bill of exchange?
Answer:
A bill drawn in favour of a person from whom the amount is due. In other words, a bill of exchange is drawn by the creditors on his/her debtors to make payment of specific amount, on a mentioned date. Generally, as bill is drawn by a seller to a purchaser.

Purchaser accepts the bill for the amount due on account of the credit sales. The bill may be accepted for the amount due other than credit purchases, such as commission payable, salary outstanding, etc. A bill cannot come into existence without the acceptance of a debtor.

Question 8.
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 dishonor, 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:
a. Date and amount of the bill
b. Reasons for dishonor
c. Amount of Noting charges

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Question 9.
What is meant by renewal of a bill of exchange?
Answer:
When an acceptor of a bill 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.

Question 10.
Give the Format of a Bills Receivable Book. Answer: Bills Receivable Book
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -1

Question 11.
What is retirement of a bill of exchange?
Answer:
When a holder receives the amount of a bill before the maturity date on the request of the acceptor, then it is called retirement of the bill of exchange.

Question 12.
Give the format of a Bill of Exchange.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -2

Question 13.
Give the meaning of rebate.
Answer:
If the drawee expresses his/her wish to pay the bill before the due date to the holder, and if the holder accepts his/her request, then on account of the early payment, the holder may give some discount. This discount is termed as rebate.

Question 14.
Give perforata of a Bills Payable Book.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bil1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -3ls of Exchange -3

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Question 15.
A bill of exchange must contain an unconditional promise to pay. Do you agree with a statement?
Answer:
According to Negotiable Instrument Act, 1981, “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.”

A bill of exchange contains an unconditional promise to pay a certain sum of money on an agreed date to the drawer or the bearer by the drawee of the bill.

An unconditional order to pay: It is one of the important characteristic of a negotiable instrument. Unconditional order implies no condition should be attached by the acceptor regarding the payment. The conditions like, payment of bill (only in case of profit on sales), payment of bill (only if the prices of goods increase), etc. should not be attached with the bill. Moreover, the language of the bill should not be ambiguous.

Question 16.
Briefly explain the effects of dishonor and noting of a bill of exchange.
Answer:
When a bill is presented for payment and the acceptor fails to make the payment, the bill gets dishonoured. In this situation, liability of the acceptor is restored.
Entry in the books of drawer (if Noting charges are not paid):
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -4
Entry in the books of drawee:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -5
Noting charges are charged by the notary public for keeping a proof that the bill is dishonoured. The noting charges are paid by the holder of the bill but actually due on the drawee or the acceptor of the bill.. Notaiy public notes the below given facts.

  • Date and amount of bill
  • Reasons for dishonor
  • Amount of noting charges

Effects of noting charges in the books holder of bill (if noting charges are paid):
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -6
In the books of drawee :
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -7

Question 17.
Explain briefly the procedure of calculating the date of maturity of a bill of exchange? Give example.
Answer:
The procedure to calculate the date of maturity of a bill of exchange is given below. Ascertain the date on which the bill will be honoured.

For example: a bill with maturity period of one month is drawn on 1st July and due date is 1st September. Then add 3 days of grace and payment will be made on 4th September.

Days of grace depends on the following situations:
Declared holidays: If the payment day happens to be a national holiday or Sunday, then the preceding day becomes the payment day.

Undeclared holidays: If the payment day happens to be an emergency holiday, then the succeeding day becomes the payment day.

Question 18.
Distinguish between bill of exchange and promissory note.
Answer:

Basis Bill of Exchange Promissory Note
Drawer It is drawn by the creditor It is drawn by the debtor
Order or Promise and Parties It contains an order to make payment. There can be three parties to it, viz the drawer, the drawee and the payee. It contains a promise to make payment. There are only two parties to it, viz the drawer and the payee.
Acceptance It requires acceptance by the drawee or someone else on his behalf. It does not require any acceptance.
Payee Drawer and payee can be the same party. Drawer cannot be the payee
Notice In case of its dishonour due notice of dishonour is to be given by the holder to the drawer. No notice needs to be given in case of its dishonour.

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Question 19.
Briefly explain the purpose and benefits of retiring a bill of exchange to the debtor and the creditor.
Answer:
When a holder receives the amount of a bill before the maturity date on request of the acceptor, it is called retirement of the bill of exchange. Holder of the bill may give discount for such earlier payment. This discount is termed as ‘rebate’.

Rebate is given by the holder to the acceptor of the bill on account of payment before the due date. Rebate is a loss for the holder of the bill; so, it is debited in the books of the holder when payment is received.

Question 20.
Explain briefly the purpose and advantages of maintaining of a Bills Receivable Book.
Answer:
Bills Receivable Book is a special purpose book that is maintained to keep records of bills received from the debtors. It contains details such as acceptor’s name, date of bill, due date, amount, etc. for future references. It is totaled periodically and its balance is transferred to the debit side of the bills receivable account.

Benefits of Maintaining the Bill Receivable Book –

a. Availability of information: All the information related to the bills receivable, such as amount, due date, etc., is recorded at one place and hence are easily accessible.

b. Possibility of fraud: Since all the bills are recorded at one place, possibility of fraud is minimized.

c. Responsibility: The person who maintains the bills receivable book will also be responsible for any errors or omissions. Therefore, higher degree of accountability and responsibility exists. Also, if any error is detected, then it can be fixed quickly.

d. Time efficient: Recording of bills receivable through the bills receivable book takes lesser time than that of journal entry. Therefore, it saves time of the accountant in recording numerous transactions of repetitive and routine nature.

Question 21.
Briefly explain the benefit of maintaining a Bills Payable Book and state how is its posting is done in the ledger?
Answer:
A Bills Payable Book is a special purpose book, maintained to keep records of acceptance of bills, given to the creditors. It contains details of the amount, date of bill, due date, to whom acceptance is given, etc., for future references. It is totaled periodically and its balance is transferred to the credit side of the bills payable account.
Benefits of Maintaining Bills Payable Book
a. Availability of information: All the information related to the bills payable are recorded atone place, such as the amount, due date, etc.

b. Possibility of fraiid: Since all the bills are recorded at one place, possibility of fraud is minimized.

c. Responsibility: All the transactions are recorded by the same person. Therefore, errors can be easily detected and rectified. This leads to a higher degree of responsibility and accountability of the accountant.

d. Time efficient: Recording of bills payable through the bills payable book takes lesser time than that of journal entry. Therefore, it saves time of the accountant in recording numerous transactions of repetitive and routine nature.

The posting from this books are made to the debit of the account of every creditor to whom acceptance has been given and the periodical total of the books is credited to the ‘Bills Payable Account’ in the ledger.

The bills payable account representing the liability of the acceptor in respect of bills accepted by him, always has credit balance, if any. The credit balance of this account on any particular date must be the same as the total amount worth of bills payable yet to be presented for payment as ascertained from the bills payable book.

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1st PUC Bills of Exchange Twelve Marks Questions and Answers

1st PUC Bills of Exchange Numerical Questions

Question 1.
On Jan 01, 2006 Rao sold goods ₹ 10,000 to Reddy. Half of the payment was made immediately and for the remaining half Rao drew a bill of exchange upon Reddy payable after 30 days. Reddy accepted the bill and returned it to Rao. On the due date Rao presented the bill to Reddy and received the payment.
Journalise the above transactions in the books Rao and prepare of Rao’s account in the books of Reddy.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -8
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -9

Question 2.
On Jan 01,2006, Shankar purchased goods from Parvati for ₹ 8,000 and immediately drew a promissory note in favour of Parvati payable after 3 months. On the date of maturity of the promissory note, the Government of India declared holiday under the Negotiable Instrument Act 1881. Since, Parvati was unaware about the provision of the law regarding the date of maturity of the bill. She handed over the bill to her lawyer. Who duly presented the bill and received the payment. The amount of the bill was handed over by the lawyer to Parvati immediately. Record the necessary Journal entries in the books of Parvati and Shankar.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -10
Question 3.
Vishal sold goods for ₹ 7,000 to Manju on Jan 05, 2006 and drew upon her a bill of exchange payable after 2 months. Manju accepted Visha’s draft and handed over the same to Vishal after acceptance. Vishal immediately discounted the bill with his bank @ 12%p.a. on the due date Manju met her acceptance.
Journa’ise the above transactions in the books of Vishal and Manju.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -11

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Question 4.
On Feb 01,2006, John purchased goods for ₹ 15,000 from Jimmi. He immediately made a payment of ₹ 5,000 by cheque and for the balance accepted the bill of exchange drawn upon him by Jimmi. The bill of exchange was payable after 40 days. Five days before the maturity of the bill, Jimmi sent the same to his bank for collection. The bank duly presented the bill to John on the due date who met the bill. The bank informed the same to Jimmi.
Prepare John’s account in the books of Jimmi and Jimmi account in the books of John.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -12
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -13
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -14
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -15

Question 5.
On Jan 15, 2006, Kartar Sold goods for ₹ 30,000 to Bhagwan and drew upon him three bill of exchanges of ₹ 10,000 each payable after one month, two month, and three months respectively. The first bill was retained by Kartar till its maturity. The second bill was endorsed by him immediately @ 6% p.a. All the bills were met by Bhagwan. Journalise the above transactions in the books of Kartar and Bhagwan. Also prepare ledger accounts in books of Kartar and Bhagwan.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -16
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -17
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -18

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1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -19
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -20
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -21
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -22

Question 6.
On Jan, 01,2006 Arun sold goods for ₹ 30,000 to Sunil. 50% of the payment was made immediately by Sunil on which Arun allowed a cash discount of 2%. For the balance Sunil drew a promissory note in favour of Arun payable after 20 days. Since the date of maturity of bill was a public holiday. Arun presented the bill on a day, as per the provisions of Negotiable Instrument Act which was met by Sunil. State the date on which the bill was presented by Arun for payment and Journalise the above transactions in the books of Arun and Sunil.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -23

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Question 7.
Darshan sold goods for ₹ 40,000 to Varun on 8.1.2006 and drew upon him a bill of exchange payable after two months. Varun accepted the bill and returned the same to Darshan. On the due date the bill was met by Varun in the following circumstances.

  • When the bill was retained by Darshan till the date of its maturity.
  • When Darshan immediately discounted the bill @ 6% p.a. with his bank.
  • When the bill was endorsed immediately by Darshan in favour of his creditor Suresh
  • When three days before its maturity. The bill was sent by Darshan to his bank for collection.

Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -24

Case ii:- When Darshan immediately discounted the bill @ 6% with the bank.
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -25
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -26

Case iii:- When the bill was endorsed by Darshan to Suresh
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -27
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -28
Journal entry in the books of Varun is same as before

Case iv:- When 3 days before maturity, bill was sent to bank for collection
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -29

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Question 8.
Bansal Traders allow a trade discount of 10% on the list price of the goods purchased from them. Mohan traders, who runs a retail shop made the following purchases from Bansal Traders.
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -30
For all the purchases Mohan Traders drew promissory note in favour of Bansal Traders payable after 30 days. The promissory note for the sale of Dec. 21, 2005 was retained by Bansal Traders with them till the date if its maturity. The promissory note drawn on 26.12.2005 was discounted by Bansal Traders from their bank at 12% p.a. the promissory note drawn on Dec. 28, 2005 was endorsed by Bansai Traders in favour of their creditor Dream Soaps in full settlement of a purchase amounting to ₹ 1,900. On 25.1.2006 Bansal Traders sent the promissory note drawn on Dec. 31, 2005 to their bank for collection.

All the Promissory notes were met by Mohan Traders. Record the necessary journal entries for the above transactions in the books of Bansal Traders and Mohan Traders and prepare Mohan Traders account in the books of Bansal Traders and Bansal Traders account in the books of Mohan Traders.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -31
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -32
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -33
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -34
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -35

Question 9.
Narayanan purchased goods for Rs. 25,000 from Ravinderan on Feb. 01, 2006, Ravinderan drew upon Narayanan a bill of exchange for the same amount payable after 30 days. On the due date Narayanan dishonoured his acceptance.
Pass the necessary journal entries in the books of Ravinderan and Narayanan in following cases:

  • When the bill was retained by Ravinderan with him till the date of its maturity.
  • When the bill was discounted by Ravinderan immediately with his bank @ 6% p.a.
  • When the bill was endorsed to his creditor Ganeshan.
  • When the bill was sent by Ravinderan to his bank for collection a few days before it maturity.

Answer:
Case i:- When the bill was retained by him
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -36 (2)
Note: (Above) This J.E is applicable to all the cases (only acceptor J.E)

Case ii:- When the bill discounted with the bank at 6% p.a.

1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -37

Case iii:- When the bill endorsed to Ganeshan

1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -38

Case iv:- When the bill sent to bank for collection

1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -39

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Question 10.
Ravi sold goods for ₹ 40,000 to Sudershan on Feb 13,2006. He drew four bills of exchange upon Sudershan. The first bill was for ₹ 5,000 payable after one month. The second bill was for ₹ 10,000 payable after 40 days: the third bill was for ₹12,000 payable after three months and accepted all the bills and returned the same to Ravi. Ravi discounted the first bill with his bank at 6% p.a. He endorsed the second bill to his creditor Mustaq for the full settlement of a debt of ₹ 10,200. The third bill was kept by Ravi with him till the date of maturity. Five days before the maturity of the fourth bill. Ravi sent the bill to his bank for collection. All the four bills were dishonoured by Sudarshan on maturity. Sudershan settled Ravi’s claim in cash three days after the dishonor of each bill along with interest @ 12% p.a. for the terms of the bills.

You are requested to record the necessary journal entries in the books to Ravi, Sudershan, Mustaq and bank for the above transaction. Also Prepare Sudershan’s account and Mustaq’s account in the books of Ravi.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -40
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -41
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -42
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -43
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -44
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -45
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -46

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Question 11.
On Jan 01, 2006 Neha sold goods for ₹ 20,000 to Muskan and drew upon her a bill of exchange payable after two months. One month before the maturity of the bill Muskan approached Neha to accept the payment against the bill at a rebate @12% p.a. Neha . agreed to the request of Muskan and muskan retired the bill under the agreed rate of rebate.
Journalise the above transaction in the books on Neha and Muskan.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -47

Question 12.
On Jan 15, 2006 Raghu sold goods worth ₹ 35,000 to Devendra and drew upto the latter three bills of exchanges. The first bill was for ₹ 5,000 payable after one month. The second bill was for ₹ 20,000 payable after three months and third bill for balance amount for 4 months. Raghu endorsed the first bill in favour of his creditor Dewan in full settlement of a debt of ₹ 5,200. The second bill was discounted by Raghu @ 6% p.a. and the third bill was retained by Raghu till the date of maturity. Devendra dishonoured the bill on maturity and the bank paid ₹ 30 as noting charges. Four days before the maturity of the third bill Raghu, sent the same for collection to his bank. The third bill was also dishonoured by Devendra and the bank paid ? 200 as noting charges. Five days after the dishonor of the bill Devendra paid the charges. Five days after the dishonor of the bill Devendra paid the entire amount due to Raghu along with interest ₹ 1,000 for this purpose Devendra obtained a short term loan from his bank.

You are requested to record the necessary journal entries in the books of Raghu Devendra and Dewan and also prepare Devendra’s account in Raghu’s books and Raghu’s account in Devendra’s account.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -48
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -49
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -50
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -51
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -52

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Question 13.
Viaml purchased goods ₹ 25,000 from Kamal on Jan 15, 2006 and accepted a bill of exchange drawn upon him by Kamal payable after two months. On the date of the maturity the bill was duly presented for payment. Vimal dishonoured the bill.
Record the necessary journal entries in the books of Kamal and Vimal when.

  • The bill was retained by Kamal till the date of its maturity.
  • The bill was immediately discounted by Kamal with his bank @ 6% p.a.
  • The bill was endorsed by Kamal in favour of his creditor Shared.
  • Five days before its maturity the bill was sent by a Kamal to his bank for collection.

Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -53
This is applicable to all the cases.

Case (ii) The bill discounted with bank @ 6% p.a.
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -54

Question 14.
Abdulla sold goods to Tahir on Jan 17, 2006 for ₹ 18,000. He drew a bill of exchange for the same amount on Tahir for 45 days. On the same date Tahir accepted the bill and returned it to Abdulla. On the due date Abdulla presented the bill to Tahir which was dishonoured. Abdulla paid ₹ 40 as noting charges. Five days after the dishonor of his acceptance Tahir settled his debt by making a payment of ₹ 18,700 including interest and noting charges.
Record the necessary journal entries in the books of Abdulla and Tahir. Also prepare Tahir’s account in the books of Abdulla and Abdulla’s account in the books of Tahir.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -55
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -56

Question 15.
Asha sold goods worth ₹ 19,000 to Nisha on March 02,2006. ₹ 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. On the due date Nisha discounted the bill and the bank paid ₹ 30 as noting charges.
Record the necessary journal entries in the books of Asha and Nisha.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -57

KSEEB Solutions
Question 16.
Lilly sold goods to Methew on 1.3.2006 for ₹ 12,000 and drew upon Methew a bill of exchange for the same amount payable after two months. Lilly immediately discounted the bill with her bank at 9% p.a. The maturity date of the bill was a non-business day (holiday), therefore, Lilly had to present the bill as per the provisions of the Indian Instruments Act. 1881. The bill was dishonoured by Mathew and Lilly paid X 45 as noting charges. Methew settled the claim of Lilly five days after the dishonor of the bill by a cheque. Which includes interest @ 12% for the term of the bill.
Journalise the above transactions in the books of Lilly and Maethew and prepare Methew’s account in the books of Lilly and Lilly’s account in the books of Methew.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -58
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -59
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -60

Question 17.
Kapil purchased goods for ₹ 21,000 from Gaurav on 1.2.2006 and accepted a bill of exchange drawn by Gaurav for the same account. The bill was payable after on month. On 25.2.2002 Gaurav sent the bill to his bank for collection. The bill was duly presented by the bank, Kapil dishonoured the bill and the bank paid ₹ 100 as noting charges. Record the necessary journal entries for the above transactions in the books of Kapil and Gaurav.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -61

KSEEB Solutions

Question 18.
On Feb. 14,2006 Rashmi sold good ₹ 7,500 to Alka. Alka paid ₹ 500 in cash and for the bank balance accepted a bill of exchange drawn upon her by Rashmi payable after two months. On Apr. 10,2006 Alka approached Rashmi to cancel the bill since she was short of funds. She further requested Rashmi to accept ₹ 2,000 in cash and draw a new bill for the balance including interest ₹ 500. Rashmi accepted Alks’a request and drew a new bill for the amount due payable after 2 months. The bill was accepted by Alka. The new bill was duly met by Alak on maturity.
Record the necessary journal entries in the books of Rashmi and Alka and prepare Alka’s account in the books of Rashmi’s and Rashmi’s account in the books of Alka’s.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -62
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -63
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -64
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -65

KSEEB Solutions

Question 19.
On 1.11.06 Rama sold goods to Lakshmana for Rs. 10,000
On 1.11.06 Lakshmana accepted 3 months bill
On 1.11.06 Rama endorsed the bill to Hanuma on due date the bill was duly met.
Pass necessary entries in the books of Rama, Lakshmana and Hanuma.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -66
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -67
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -68
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -69

Question 20.
Divya sold goods to Bhavya for Rs. 15,000 on 1.3.2006 and drew a 3 months bill. On the same date Divya endorsed the bill to Kavya. After one month Kavya discounted the bill for Rs. 14,500 with her banker. On the due date the bill was duly honoured. Pass Journal entries in the books of Divya, Bhavya and Kavya.
Answer:
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -70
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -71
1st PUC Accountancy Question Bank Chapter 8 Bills of Exchange -72

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