Tag: accounting treatment of bill transaction

Questions Related to accounting treatment of bill transaction

Payment of bill before due date _________________.

book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

  1. Retirement of bill

  2. Discounting of bill

  3. Honouring of bill

  4. Dishonour of bill

Show answer
Correct Option: A
Explanation:

When drawee makes the payment of the bill before its due date it is called retirement of the bill.

Rebate on bills discounted is _______ from interest and discount in the P/L Account .

book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

  1. added

  2. deducted

  3. not deducted

  4. none of the above

Show answer
Correct Option: B
Explanation:

Rebate on bills discounted is also known as discount received in advance i.e. discount received but not earned.

In such a situation, the rebate on bills discounts will be deducted from interest and discount in profit & loss account and shown as liability in the balance sheet.

When an amount is paid before maturity the bill is said to be ______.

book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

  1. Hnoured

  2. Dishonoured

  3. Retired

  4. Discounted

Show answer
Correct Option: C
Explanation:

When Drawee makes the payment of the bill before its due date it is called retirement of the bill.

At the time of retirement of a bill, the acceptor debits:

book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

  1. Creditors Account

  2. Bank Account

  3. Discount Account

  4. Bills Payable Account

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Correct Option: D

__________________ means cancellation of old bill and drawing a new bill.

book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

  1. Dishonour of bill

  2. Honouring of bill

  3. Retirement of bill

  4. Renewal of bill

Show answer
Correct Option: D
Explanation:

When on or before due date drawee finds himself unable to make the payment of the bill, he may request the drawer to cancel the old bill and accept a new one, this process is called renewal of the bill.

At the time of the renewal of a bill, interest account is ____________ in the books of the drawee.

book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

  1. credited

  2. totalled

  3. debited

  4. posted

Show answer
Correct Option: C
Explanation:

In the books of Acceptor

1] Entry for Cancellation of Bill:

Bills Payable A/c ……….………….. Dr

To Drawer Personal A/c

2] Entry for part payment in cash:

Drawer’s Personal A/c……………… Dr

To Cash A/c

3] Entry for Interest Paid:

Interest A/c …………………………. Dr

To Cash A/c

4] Interest not paid:

Interest A/c …………………………. Dr

To Drawer’s Personal A/c

Which of the following is not correct ?

book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

  1. A joint venture business has a definite life.

  2. No cancellation entry is required when a bill is renewed.

  3. The gain from side of capital assets need not be added to revenue to ascertain the net profit of a business.

  4. If the amount is posted in the wrong account or it is written on the wrong side of an account, it is called error of commission.

Show answer
Correct Option: B

____________ means payment of  bill before due date.

book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

  1. Retirement of bill

  2. Renewal of bill

  3. Endorsement of bill

  4. Discounting of bill

Show answer
Correct Option: A
Explanation:

Retirement of Bill Means Payment of the Bill before Due Date.

At the time of retirement of a bill, the accounts to be credited are:

book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

  1. Bills Payable and Bank.

  2. Bills Receivable and Bank.

  3. Bank and Discount.

  4. Bills Payable and Discount.

Show answer
Correct Option: C

The cancellation of the old bill maturity in return for a new bill (which includes interest) for an extended period is called ________________.

book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

  1. Retiring of a bill

  2. Renewal of a bill

  3. Dishonor of a bill

  4. Rebate on bill

Show answer
Correct Option: B
Explanation:

Sometimes, acceptor of a bill finds himself unable to meet his acceptance on the due date. So he may approach the drawer of the bill before the maturity date arrives, to cancel the old bill and draw a new bill with extended date. The acceptor in this case will of course have to pay interest for the extended period. Thus the cancellation of the old bill maturity in return for a new bill (which includes interest) for an extended period is called "renewal of a bill of exchange".