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CBSE Questions for Class 11 Commerce Accountancy Bill Of Exchange Quiz 5 - MCQExams.com
CBSE
Class 11 Commerce Accountancy
Bill Of Exchange
Quiz 5
The term bill of exchange is defined in section _________ of the Negotiable Instruments Act.
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0%
$$3$$
0%
$$5$$
0%
$$4$$
0%
$$10$$
Explanation
According to section 5 of 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. A bill of exchange is generally drawn by the creditor upon his debtor.
The person who draws the cheque and signs on it is the ______.
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drawer
0%
drawee
0%
payee
0%
all of the above
Explanation
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 maker of the bill of exchange.
Bill of exchange is an _________.
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unconditional order to pay
0%
unconditional undertaking to pay
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conditional order to pay
0%
conditional undertaking to pay
Explanation
According to section 5 of 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. A bill of exchange is generally drawn by the creditor upon his debtor. It has to be accepted by the drawee (debtor) or someone on his behalf. It is just a draft till its acceptance is made.
Bank on whom a cheque is drawn.
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Drawer
0%
Drawee
0%
Payee
0%
Endorsee
Bill of exchange is drawn by ________.
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0%
creditor
0%
debtor
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customer
0%
any of the above
Explanation
According to 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. A bill of exchange is generally drawn by the creditor upon his debtor.
How many parties are usually found in the case of a bill of exchange?
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$$2$$
0%
$$3$$
0%
$$4$$
0%
$$5$$
Explanation
There are three parties to a bill of exchange:
(1) 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.
(2) Drawee is the person upon whom the bill of exchange is drawn. Drawee is the purchaser or debtor of the goods upon whom the bill of exchange is drawn.
(3) Payee is the person to whom the payment is made.
How many parties are there in a Promissory note?
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$$5$$
0%
$$4$$
0%
$$3$$
0%
$$2$$
Explanation
There are two parties to a promissory note:
(1) Maker or Drawer is the person who makes or draws the promissory note to pay a certain amount as specified in the promissory note. He is also called the promisor.
(2) Drawee or Payee is the person in whose favour the promissory note is drawn. He is called the promisee.
How many days grace period is given for payment of a bill of exchange?
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$$3$$
0%
$$7$$
0%
$$4$$
0%
$$5$$
Explanation
According to the Negotiable Instruments Act, 1181, 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. The term maturity refers to the date on which a bill of exchange or promissory note becomes due for payment. In arriving at maturity date, three days, known as days of grace, must be added to the date on which the period of credit expires.
Drawee means a person who ___________.
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makes the order
0%
accepts it
0%
payee
0%
all of the above
Explanation
Drawee is a party to the bill of exchange. Drawee is the person upon whom the bill of exchange is drawn. He is the purchaser or debtor of the goods upon whom the bill of exchange is drawn. The person who accepts the bill is called the acceptor. Normally, the drawee and the acceptor are the same . Drawee means a person who accepts the bill of exchange, but a third person may accept a bill on behalf of the drawee.
Bill payable is drawn by __________.
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0%
creditor
0%
supplier
0%
debtor
0%
none of the above
Explanation
A bill payable is a document which shows the amount owed for goods or services received on credit. Examples of bill payable include a monthly telephone bill, electricity bill, a bill for repairs or maintenance, the bill for merchandise purchased by a retailer on credit, etc. For the person who accepts the bill it is a bills payable. Bills payable is drawn by the debtor..
A promissory note is a/ an ________.
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unconditional order to pay
0%
unconditional undertaking to pay
0%
conditional order to pay
0%
conditional undertaking to pay
Explanation
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.
The term Promissory notes is defined in section _______ of the Negotiable Instruments Act.
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0%
$$3$$
0%
$$4$$
0%
$$6$$
0%
$$8$$
Explanation
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.
Drawer means a person who ___________.
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0%
makes the order
0%
accepts it
0%
payee
0%
all of the above
Explanation
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.
________ is not an essential requirement of a valid bill of exchange.
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Acceptance
0%
Consideration
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Specific sum payable
0%
Writing
Inland bills are those bills which are ________ or ________ in India.
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Drawn, Payable
0%
Accepted, Stamped
0%
Stamped, Registered
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None of the Above
Explanation
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).
Drawee of a bill of exchange is generally a ________.
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0%
creditor
0%
debtor
0%
both of the above
0%
none of the above
Explanation
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. Drawee is the person upon whom the bill of exchange is drawn. Drawee is the purchaser or debtor of the goods upon whom the bill of exchange is drawn.
Retirement of bill means __________.
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making payment before the due date
0%
cancellation of the bill
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sending the bill for collection
0%
endorsing the bill in favour of third party
Explanation
When the drawee of the bill has funds at his disposal and makes a request to the drawer or holder to accept the payment of the bill before its maturity with some discount and if the holder agrees to do so, it is called the retirement of a bill of exchange. Hence, the correct option is A.
A draws a bill of exchange of $$Rs. 2500$$ on B for $$4$$ months on $$2nd$$ February. The due date of the bill of exchange will be ___________.
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$$2nd\ July$$
0%
$$6th\ June$$
0%
$$5th\ June$$
0%
$$3rd\ June$$
Explanation
Due date of bill = 4 months + 3 days of grace.
Therefore, Due date = 5th June.
Therefore, C is the correct option.
On acceptance of bill - the drawee, debit which of these accounts?
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Drawer's A/c.
0%
Bills Receivable A/c.
0%
Bills Payable A/c.
0%
Endorse A/c.
Explanation
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).
Payee of a bill of exchange is a person __________.
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to whom the bill of exchange is payable
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who has accepted the bill of exchange
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a person who draw the bill
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to whom the bill is endorsed
Explanation
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.
A foreign bill is generally drawn in __________.
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duplicate
0%
triplicate
0%
single copy
0%
quadruplicate
Explanation
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..
Dishonour of a foreign bill requires protest if the law of the place ________ requires.
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Where it is drawn
0%
Where it is payable
0%
Where it is accepted
0%
Where the payee reside
Explanation
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.
Drawer of a bill of exchange is generally a _________.
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0%
creditor
0%
debtor
0%
both of the above
0%
none of the above
Explanation
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.
Bill drawn and accepted for genuine trade transaction is called _________.
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Trade Bill
0%
Accommodation Bill
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Genuine Bill
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Commercial Bill
Explanation
Bills of exchange or promissory notes are drawn to finance the actual transactions in goods, i.e., an acceptance is made to settle a trade debt owing to the drawer by the drawee in case of a bill of exchange and the bill is called a trade bill. As it originates from genuine trade transaction it is for value received and is enforceable.
U/s $$12$$ of the negotiable instruments act, all the instruments which are not inland instruments are_______.
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not valid in India
0%
local instruments
0%
foreign instruments
0%
none of the above
Explanation
Under section 12 of the Negotiable Instruments Act, all the instruments which are not inland instruments are called as foreign instruments. Any instrument not drawn or made payable in India is a foreign instrument.
X a resident of Japan draw a bill of exchange of $$Rs. 5000$$ upon Y payable in Mumbai. This is a ___________.
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0%
Inland bill
0%
Inchoate bill
0%
Foreign bill
0%
Accommodation bill
Explanation
A bill which is not an inland bill, is deemed to be a foreign bill.
Example: A bill of exchange drawn in India, on a person residing outside India and made payable outside India.
A bill drawn outside India and made payable in India.
A bill drawn outside India, on a person residing in India.
X, a resident of Japan draws a bill of exchange of Rs. 5,000 upon Y payable in Mumbai is an example of foreign bill.
When a bill endorsed is dishonoured, ________ a/c is credited by the drawee.
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bills payable A/c
0%
drawer
0%
bank
0%
bill dishonored A/c
Explanation
Any holder may transfer a bill unless its transfer is restricted, i.e. the bill has been negotiated containing words prohibiting its transfer. The bill can be initially endorsed by the drawer by putting his signatures at the back of the bill with the name of the party to whom its is being transferred. The act of signing and transferring the bill is called as endorsement. When a bill endorsed is dishonoured, drawer a/c is credited by the drawee.
Mr. X accepted a bill of exchange of $$Rs. 1500$$ drawn by Y and payable in $$3$$ months. He got it discounted from bank at $$2$$% discount. On the due date X failed to pay the bill as he was adjudged insolvent. A final dividend of $$0.25$$ in a rupee was received from his estate. Find the amount recovered from the estate of X.
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0%
$$300$$
0%
$$360$$
0%
$$375$$
0%
$$400$$
Explanation
Mr. X accepted a bill of exchange of
R
s
.
1500
Rs.1500
drawn by Y and payable in
3
3
months.
So, the amount due from X is Rs. 1500, he is paying Rs. 0.25 in a rupee.
Therefore, 1500 X 25%= Rs.375 recoverable from Mr.X.
R draws a bill of exchange on S for $$Rs. 8,000$$ for $$4$$ months. He got it discounted with a Bank at $$12$$% p.a. The net proceeds to be received from bank will be _______.
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0%
$$Rs. 7900$$
0%
$$Rs. 7680$$
0%
$$Rs. 8000$$
0%
$$Rs. 7650$$
A draw a bill of exchange on $$B$$ for $$Rs. 3,000$$ for $$4$$ months. He got it discounted with a Bank at $$12$$% p.a. The discount charged by the bank will be _________.
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0%
$$Rs. 120$$
0%
$$Rs. 360$$
0%
$$Rs. 125$$
0%
$$Rs. 154$$
Explanation
Amount of discount charged by the bank = Rs. 3000 x (12/100) x (4/12)
= Rs. 120
Therefore, A is the correct option.
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Practice Class 11 Commerce Accountancy Quiz Questions and Answers
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