Tag: meaning, definition and characteristics of promissory note

Questions Related to meaning, definition and characteristics of promissory note

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

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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

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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. 

For the purpose of attracting the provisions of section 138 of the Negotiable Instruments Act, 1881, a cheque has to be presented to the bank _____________________.

commercial applications banking and bank transactions nature, advantages and types of cheques bills of exchange and promissory note meaning and types of banks meaning, definition and characteristics of promissory note promissory note

  1. Within a period of six months

  2. Within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier.

  3. Within a period of 15 days from the date on which it is drawn

  4. None of the above

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Correct Option: B

A cheque is drawn only on the bank in which the drawer has his account. But the bill of exchange can be drawn on _______________ including a ___________.

commercial applications banking and bank transactions nature, advantages and types of cheques bills of exchange and promissory note meaning and types of banks meaning, definition and characteristics of promissory note promissory note

  1. any person; bank

  2. drawee; payee

  3. drawee: drawer

  4. payee: drawer

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Correct Option: A

Which one of the following is 'Not' the feature of a cheque?

commercial applications banking and bank transactions nature, advantages and types of cheques bills of exchange and promissory note meaning and types of banks meaning, definition and characteristics of promissory note promissory note

  1. It is an unconditional written order by the maker to pay.

  2. The written order is to a specified bank.

  3. It specifies the amount to be paid in figures and words.

  4. None of the above.

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Correct Option: D

Crossing of a cheque effects the ___________________.

commercial applications banking and bank transactions nature, advantages and types of cheques bills of exchange and promissory note meaning and types of banks meaning, definition and characteristics of promissory note promissory note

  1. Negotiability of the cheque

  2. Mode of payment on the cheque

  3. Both a and b

  4. Transferable but does not give a better title to the holder

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Correct Option: B

As per Negotiable Instrument Act $1881$ all of the following are types of the cheque EXCEPT:

commercial applications banking and bank transactions nature, advantages and types of cheques bills of exchange and promissory note meaning and types of banks meaning, definition and characteristics of promissory note promissory note

  1. Bearer Cheques

  2. Order Cheques

  3. Crossed Cheques

  4. Blank Cheques

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Correct Option: D

A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.

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

  1. True

  2. False

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Correct Option: A

Taking in care of Negotiable Instrument Act. $1881$, which of the following is the essential for a cheque?

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

  1. It should contain conditional order

  2. It must not signed by drawer

  3. Cheque is not payable on demand

  4. It is payable to specified person

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Correct Option: D

In case of a bill of exchange, the drawee is entitled to have three days for making payment of the bill but in case of a _____________ is always payable on demand.

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

  1. promissory note

  2. cheque

  3. bills of exchange

  4. bank draft

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Correct Option: B
Explanation:

A cheque is always payable on demand. Therefore, no days of grace are allowed to the banker for payment. In case of a bill of exchange, the drawee is entitled to have three days for making payment of the bill and these extra days are known as grace days.