Tag: accounting for bills of exchange

Questions Related to accounting for bills of exchange

X execute a promissory note like I promise to pay B $Rs. 1000$ (Rupees one hundred) payable after three months. This promissory note is ________.

book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

  1. invalid

  2. valid for $Rs. 100$

  3. valid for $Rs. 1000$

  4. valid for the amount decided by the payee

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Correct Option: B

The term Promissory notes is defined in section _______ of the Negotiable Instruments Act.

book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

  1. $3$

  2. $4$

  3. $6$

  4. $8$

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Correct Option: B
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. 

A promissory note read like I promise to pay B $RS. 1000$ three months after marriage of C. This promissory note is invalid due to.

book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

  1. Uncertainty of time of payment

  2. Amount being not significant

  3. Insufficiency of time

  4. All the three

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Correct Option: A

A promissory note cannot be made payable to bearer.

book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

  1. True

  2. False

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Correct Option: A
Explanation:

 There are only two parties to a Promissory Note, one is the maker or the payer and another one is the payee.The sum should be payable to a certain person. It is not transferable and thus, the amount is not payable to the bearer.

A promissory note can be made payable to bearer.

book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

  1. True

  2. False

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Correct Option: B
Explanation:

 The sum should be payable to a certain person. There are only two parties to a Promissory Note, one is the maker or the payer and another one is the payee. It is not transferable and thus, the amount is not payable to the bearer.

The undertaking contained in a promissory note, to pay a certain sum of money is _________________.

book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

  1. Conditional

  2. Unconditional

  3. May be conditional or unconditional depending upon the circumstances

  4. None of the above

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Correct Option: B

In a promissory note, the amount of money payable ____________________.

book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

  1. Must be certain

  2. May be certain or uncertain

  3. Is usually uncertain

  4. None of the above

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Correct Option: A

A promissory Note Requires acceptance.

book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

  1. True

  2. False

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Correct Option: B

Mr. Amit signs on instrument in the following terms.
(i) " I promise to pay B or order Rs $500$"
(ii) " I promise to pay B Rs$500$, first deducting all other sums which shall be due to him."
(iii) " I promise to pay B Rs$500$ on D's death, provided D leaves one enough to pay that sum"
Which of the following are promissory notes?

book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

  1. Only (i)

  2. Both (i) & (ii)

  3. Both (ii) & (iii)

  4. All of the above

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Correct Option: A

The expression "after sight" in a promissory note means that ____________.

book keeping and accountancy accounting for bills of exchange meaning, definition and characteristics of promissory note promissory note bills of exchange and promissory note nature, advantages and types of cheques

  1. The payment can be demanded without it has been shown to the maker.

  2. The payment cannot be demanded on it unless it has been shown to the maker.

  3. The holder may treat the instrument, at his option, either as a bill of exchange or as a promissory note.

  4. The payment cannot be demanded

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Correct Option: A