Class - XI Subject – Accountancy Topic – BILLS OF EXCHANGE

Section A: Theory Questions

1. What do you mean by Bills of Exchange?

2. What are the features of Bills of Exchange?

3. Who are the parties involved in a Bill Of Exchange?

4. What are the advantages of a Bills of Exchange?

5. What do you mean by a Promissory Note? What are the features of a Promissory Note?

6. What is the difference between a Bills of Exchange and a Promissory Note?

7. When is the Bill considered to be dishonoured?

8. Who are the parties to a Promissory Note?

9. Write a note on the following:

a. Dishonour of Bill                                         b. Endorsement Of Bill

c. Retiring of Bills Of Exchange                      d. Noting Charges

e. Discounting Of Bill                                       f. Bill sent for collection

10.A Bill of Exchange was drawn on 11 June,2010; its term was 1 month. What will be the due date of maturity?

11. A Bill of Exchange drawn on 1^st Jan,2010 for Rs. 5900 for 3 months was dishonoured on due date and a sum of Rs. 20 was incurred as nothing charges. The bill was renewed for another 3 months with 12% interest per annum. Find out the amount of the renewed bill.

12. What is retiring a bill under rebate?

13. What are the different options available to the receiver if the Bill?

14. “ A Bill of Exchange is a legal evidence of a debt” . Do you agree. Justify.

15. Find out the due date of a Bill of Exchange dated 9^th December,2014 payable after 45 days.

16. A has drawn a Bill on B. B accepts the Bill. Can B endorse the Bill to C?

17.What will be the due date of the following Bills of Exchange?

a. A Promissory Note, dated 27^th April,2014 payable 60 days after date without grace.

b. A Promissory Note, dated 30^th June,2010 payable 3 months after date.

18. Write the distinction between Discounting Charges and Noting Charges?

19. How is the time of payment of a Bill of Exchange calculated?

20. What do you mean by Days of Grace?

Section B: Practical Questions

1. On Jan 01, 2006 Rao sold goods Rs.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.

2. On Jan 01, 2006, Shankar purchased goods from Parvati for Rs.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. Recore the necessary Journal entries in the books of Parvati and Shankar.

3. Vishal sold goods for Rs.7,000 to Manju on Jan 05, 2006 and drew upon her a bill of exchange payable after 2 months. Manju accepted Vishal.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. Journalise the above transactions in the books of Vishal and Manju.

4. On Feb 01, 2006, John purchased goods for Rs.15,000 from Jimmi. He immediately made a payment of Rs.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.

5. 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:

a)  When the bill was retained by Ravinderan with him till the date of its maturity.

b)  When the bill was discounted by Ravinderan immediately with his bank @ 6% p.a.

c) When the bill was endorsed to his creditor Ganeshan.

d) When the bill was sent by Ravinderan to his bank for collection a few days before it maturity.

6. Ravi sold goods for Rs.40,000 to Sudershan on Feb 13, 2006. He drew four bills of exchange upon Sudershan. The first bill was for Rs.5,000 payable after one month. The second bill was for Rs.10,000 payable after 40 days; the third bill was for Rs.12,000 payable after three months and fourth bill was for the balance amount payable after 19 days. Sudershan 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 Rs.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 dishounoured by Sudarshan on maturity. Sudershan settled Ravi.s claim in cash three days after the dishonour 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. prepare Sudershan.s account and Mustaq.s account in the books

of Ravi.

7. On Jan 01, 2006 Neha sold goods for Rs.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 of Neha and Muskan.

8. On Jan 15, 2006 Raghu sold goods worth Rs. 35,000 to Devendra and drew upto the latter three bills of exchanges. The first bill was for Rs.5,000 payable after one month, the second bill was for Rs.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 Rs.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 Rs. 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 dishonored by Devendra and the bank paid Rs.200 as noting charges. Five days after the dishonour of the bill Devendra paid the entire amount due to Raghu along with interest Rs.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.

Class - XI Subject – Accountancy Topic – RECTIFICATION OF ERRORS

SECTION “A”

Q1       “Trial Balance is a conclusive proof of checking the arithmetical accuracy of the accounting records.” Explain the above statement.

Q2       Briefly explain the objectives of preparing trial balance.

Q3       What is the classification of errors?

Q4       What is meant by errors of Principle?

Q5       What is meant by errors of omission?

Q6       What is meant by error of commission?

Q7       Give two examples of types of errors that remain undetected even after preparation of trial balance.

Q8       What is Suspense Account?

Q9       In case of errors of partial omission, will the trial balance agree? Why?

SECTION “B”

Q1 Rectify the following errors:

(i)     Paid wages for the construction of office debited to Wages Account Rs. 20,000.

(ii)   Paid cartage for the newly purchased furniture Rs. 500, posted to Cartage Account.

(iii) Paid Rs. 50,000 for the installation of machinery debited to Wages Account.

(iv)   Rs. 5,000 paid for furniture purchased has been charged to the ordinary

Purchases Account.

(v)     Repairs made were debited to the Building Account for 500.

(vi)   An amount of Rs. 1,000 withdrawn by the proprietor for his personal use has been debited to the Trade Expenses Account.

(vii)                  Rs. 1,000 paid for rent debited to the Landlord’s Account.

(viii)                Salary of Rs. 1,250 paid to a clerk, due to him, has been debited to his Personal account.

(ix)   Rs. 1,000 received from Shah & Co. has been wrongly entered as from Shaw & Co.

(x)     Rs. 7,000 paid in cash for a typewriter was charged to the Office Expenses account.

(xi)   A purchase of goods from Ram amounting to Rs. 1,500 has been wrongly passed through the Sales Book

(xii)                   A credit sale of goods of Rs. 1,200 to Ramesh has been wrongly passed through the Purchases Book.

(xiii)                An amount of Rs. 2,000 due form M.C which had been written off as a Bad Debt in a previous year was unexpectedly recovered and has been posted to the personal account of M.C.

(xiv)                 A cheque for Rs. 1,000 received from M.N was dishonored and had been posted to the debit of the Sales Returns Account.

(xv)A credit sale of Rs. 5,000 to Ram omitted to be recorded in the books.

(xvi)                Goods (Cost Rs. 2,000, Sale Price Rs. 2,400) taken by the proprietor were not recorded anywhere.

(xvii)              Goods worth Rs. 350 sold to Hari on credit were omitted from the accounts.

(xviii)            A credit sale of old furniture to Mahesh for Rs. 500 omitted to be posted.

(xix)                On 31^st March, 2007 goods of the value of Rs. 3,000 were returned by Hari and

               were taken into stock on the same date, but no entry was passed in the books.

(xx)A return of goods worth Rs. 500 by a customer was taken into stock but no entry was passed in the books.

(xxi)                A credit purchased of goods worth Rs. 1,500 from Mohan & Co. was not passed in the books although the goods were taken into stock.

(xxii)              A return of goods worth Rs. 500 by Mohan was entered in the Purchases Returns Book.

(xxiii)            A return of goods worth Rs. 800 to Sohan was passed through the Sales Returns Books.

(xxiv)             A Bills Receivable of Rs. 200 received from Ram was passed through the Bills Payable Book.

(xxv)               Acquisition charges on the purchase of a new building amounting to Rs. 5,000 were debited to the Sundry Expenses Account.

(xxvi)             Outstanding telephone charges of Rs. 2,000, had been completely omitted.

(xxvii)           Material from store of Rs. 2,000 and wages Rs. 500 (out of the total wages bill of factory) had been used in making tools and equipments for use in own factory, but no adjustments were made in the books.

(xxviii)         A credit purchase of Rs. 1,040 from Ramesh was passed in the books as Rs. 1,400.

(xxix)             Goods (Cost Rs. 5,000, Sales Price Rs. 6,000) distributed as free samples among prospective customers were not recorded anywhere.

(xxx)   Wages paid to the firm’s Workmen for making additions to machinery amounting to Rs. 350 were debited to the Wages Account.

Q2       Correct the following errors in M’s Book:

(i)                 A sum of Rs. 1,500 written off as depreciation on furniture has not been debited to the Depreciation Account.

(ii)               The returns Outward Journal has been overcast by Rs. 85.

(iii)             B returned goods worth Rs. 500; his account was debited by this amount.

(iv)              A purchase from K of Rs. 2,250 has been debited to his account.

Q3       Pass rectifying Journal entries for the following errors;

(i)                 Sales return book is undercast by Rs. 2,000.

(ii)               Goods worth Rs. 2,400 purchased on credit from V were entered in the Sales Book. However, V's account had been correctly credited.

(iii)             An old machine sold for Rs. 4,200 was entered in the Sales Book.

(iv)              Repair of building for Rs. 2,900 was debited to the Building Account.

(v)                Rs. 2,050 paid to R, a creditor is posted to the debit of M, another creditor as Rs. 5,020.

Q4       Pass rectifying entries for the following:

(i)                 Sales of goods Rs. 6,000 to M were recorded as Rs. 600 in the Sales Book.

(ii)               A credit purchase of goods from H amounting to Rs. 2,000 has been wrongly passed through the Sales Book.

(iii)             A return of goods worth Rs. 500 by a customer was entered in 'Purchases Return Book'.

(iv)              A cheque of Rs.  400 received from R was dishonored and debited to the 'Discount Account'.

(v)                A bill for Rs. 820 received from J for repair of machinery was entered in the Purchase Book as Rs. 720.

Q5       The following mistakes were located in the books of a concern after its books were closed and a Suspense Account was opened in order to achieve a Trial Balance agreement:

(i)                 The Sales Day Book was overcast by Rs. 100.

(ii)               A sale of Rs. 50 to X was wrongly debited to the account of Y.

(iii)             General Expenses of Rs. 18 were posted in the General Ledger as Rs. 180.

(iv)              A Bill Receivable for Rs. 155 was passed through Bills Payable Day Book. This bill was given by P.

(v)                Legal Expenses of Rs. 119 paid to Mr. D was debited to his Personal Account.

Find out the nature and amount of the ‘Suspense Account’ and pas entries for the rectification of the above errors in the subsequent years’ books.

Q6       The-Trial Balance of S did not agree and the difference in books was carried through Suspense Account. Pass the entries required to rectify the following errors which accounted for the difference. Also prepare the Suspense Account:

a)                  A Sales Invoice for Rs. 1,000 for goods sold on credit to B was entered in the Purchases Book; but in the Ledger, the amount was correctly debited to the account of B.

b)                  Goods bought on credit from R for Rs. 1,500 were wrongly debited to his account as Rs. 5,100.

c)                  An amount of Rs. 275 was posted as Rs. 325 to the debit side of the Commission Account. 

d)                  The Sales Book for the month of April was undercast by Rs. 100.

e)                  Rs. 460 paid for building repairs was debited to the Building Account as Rs. 640.                                                                   

Q8       The Trial Balance of M/s Gupta and Sons shows a difference of Rs. 52,200. To prepare the final A/c on 31st March 2005, this difference is placed in a suspense A/c. Afterward the following errors were disclosed. Pass necessary entries to rectify them and show the suspense A/c.

(i)                 The total of Purchase Book had been undercast by Rs. 20,000.

(ii)               A cheque received from V for Rs. 7,800 had been debited in the Cash Book but not posted in V's personal A/c.

(iii)             The return outward book had been overcasted by Rs. 10,000.

(iv)              Goods returned by Y worth Rs. 15,000 have been entered in return outward book. However, Y's A/c is correctly posted.    

                               

Q9       A trial balance disclosed a difference of Rs. 417, placed on credit side of suspense account. Later on following errors were located. Pass rectifying entries and prepare             suspense account.

(a)   Goods worth Rs. 200 purchased from S has been posted to his account as Rs. 250.

(b)   A purchase of furniture for Rs. 500 was recorded in Purchases Book.

(c)    Instead of crediting G A/c with Rs. 512, it was debited with Rs. 215.

(d)   Goods worth Rs. 130 returned by H were entered in Sales Book and posted there from to credit of H's personal A/c.                    

                             

Q10     Give rectifying entries for the following:

(i)                  Sale of goods Rs. 6,000 to M was recorded as Rs. 600 in the Sales Book.

(ii)                A credit purchase of goods from D amounting to Rs. 1,500 has been wrongly passed through the Sales Book.

(iii)               Rs. 200 salary paid to cashier B, stands wrongly debited to his Personal Account.

(iv)              A cheque of Rs.800 received from R was dishonored and debited to discount A/c.

(v)                Bill for Rs. 800 received from M for repairs of Machinery was entered in the Purchase Book as Rs. 700.