Tag: accounting for bills of exchange

Questions Related to accounting for bills of exchange

Which of these statements is not true about a Promissory note?

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. No notice of dishonour of Promissory note is required

  2. Dishonour of Promissory note does not required noting or protest

  3. A Promissory note cannot be made payable to the maker himself

  4. Promissory note cannot be made payable to the bearer

Show answer
Correct Option: A
Explanation:
  • Notice of dishonor is a notice given by the holder of a bill of exchange or promissory note, to a drawer or indorser showing that acceptance or payment has been refused. Notice of dishonor is also known as certificate of protest or certificate of dishonor.
  • Protest for dishonour: Foreign bill of exchange must be protested for dishonour when such protest is required to be made by the law of the country where they are drawn, but no such protest is needed in the case of a promissory note.
  • A promissory note cannot be made payable the maker himself, while in a bill of exchange to the drawer and payee or drawee and payee may be same person.
  • A promissory note cannot be made payable to the bearer, no matter whether it is payable on demand or after a certain time.

Which of the following instrument cannot be made payable to the 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. Promissory note

  2. Bank cheques

  3. Bill of exchange

  4. Accommodation bill

Show answer
Correct Option: A
Explanation:
  • Promissory Note :-  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.
  • A cheque which is payable to any person who presents it for payment at the bank counter is called 'Bearer cheque'.
  • When a bill of exchange is payable to bearer, it means whoever holds the bill can receive the payment due on it. 
  • “ Bearer ” means the person in possession of a bill or note which is payable to bearer.