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.