Tag: book keeping and accountancy

Questions Related to book keeping and accountancy

When a bill, which is presented by a bank for payment, is dishonoured, the account to be credited is ___________________.

book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

  1. Drawer's Account

  2. Bank Account

  3. Drawee's Account

  4. Bills Payable Account

Show answer
Correct Option: A

Bills sent for collection Rs 1000 dishonored and noting charges paid by drawer Rs 100 then, Cash A/c will be credited by Rs. _____________.

book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

  1. 1000

  2. 1100

  3. 100

  4. None

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Correct Option: C

On dishonour of a bill discounted the drawer gives credit to ________.

book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

  1. Drawee A/c

  2. Noting charges A/c

  3. Bills receivable A/c

  4. Bank A/c

Show answer
Correct Option: A
Explanation:

When a bill of exchange discounted with a bank gets dishonoured at the due date, in that case, the following entry is recorded. L.F. This entry implies that on dishonour the drawee again becomes the debtor of the drawer and bank becomes the creditor of the drawer (due to non-payment by drawee on due date)

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.

book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

  1. $300$

  2. $360$

  3. $375$

  4. $400$

Show answer
Correct Option: C

On dishonourment of a bill received through endorsement, debit is given to ________.

book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

  1. endorser's A/c

  2. payee's A/c

  3. acceptor's A/c

  4. bills payable A/c

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Correct Option: A

Insolvency of the drawee amounts to ________ of the bill.

book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

  1. retirement

  2. renewal

  3. dishonor

  4. all of the above

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Correct Option: C

________ debit noting charges A/c.

book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

  1. bank

  2. drawee

  3. drawer

  4. endorsee

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Correct Option: B

Refusal or inability of the acceptor to pay the amount of bill is termed as _______.

book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

  1. refusal

  2. dishonour

  3. retirement

  4. renewal

Show answer
Correct Option: B
Explanation:

Dishonour of bill happnes when the acceptor of the bill fails to make the payment on the date of maturity of the bill. Hecne, laibility of the acceptor is restored. Entries made for recording dishonour of the bill of exchange are reverse of the entries of recording drawing of the bill.

In the books of drawer:
Acceptor A/c Dr.
             To Bills Receivable A/c
(Bill dishonoured)

In the books of acceptor/drawee:
Bills Payable A/c Dr.
             To Drawer A/c 
(Bill dishonoured)

Dishonour of a foreign bill requires protest if the law of the place ________ requires.

book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

  1. where it is drawn

  2. where it is payable

  3. where it is accepted

  4. where the payee reside

Show answer
Correct Option: A
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.

When noting charges are paid at the time of dishonour of the bill, the drawee always debits ______________ account. 

book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

  1. noting charges

  2. interest

  3. both (A) and (B)

  4. None of the above

Show answer
Correct Option: A
Explanation:

When bill of exchange is dishonoured then in order to prove this fact to drawer may get it noted and protested through  a public official  known as a notary  public for which it charges its fees which called noting charges.such charges are recovered from the party responsible for the dishonour and when noting charges is paid at the dishonour of the bill the drawer always debit the noting charges account the journal entry is as :-



 Bills payable A/c ......... Dr.    xx
Noting charges A/c........Dr.    xx
    To Drawer's A/c...............Cr.            xx