Tag: dishonour of bills

Questions Related to dishonour of bills

To record noting charges drawer _______ Cash 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. Debits

  2. Credits

  3. No effect

  4. None

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Correct Option: B
Explanation:

In the books of a drawer, noting charges are neither credited nor debited. These noting charges are a loss for the drawee. Thus, he needs to debit it in his accounting book and credit cash A/c. The account of noting charges for a drawer is neither a profit nor a loss.

On due when Drawee Fails to make the payment 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. Bill is Honored

  2. Bill is Dishonored

  3. Bill is cancelled

  4. None of the above

Show answer
Correct Option: B
Explanation:

Dishonour of a bill of exchange occurs when the drawee fails to settle the payment on the date of maturity. When the bill of exchange is dishonoured, the liability of the acceptor is restored (he/she becomes the debtor again).

when bill is dishonored  ___________ account is Debited along with Bill payable A/c for recording noting charges.

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 A/c

  2. Cash A/c

  3. Drawer A/c

  4. None

Show answer
Correct Option: A
Explanation:

When a Bill of Exchange is dishonoured, in order to prove the fact, the drawer (or holder) may get the bill of exchange noted and protested through a public official known as “Notary Public” Noting is the recording of the fact of dishonour by a Notary public which becomes an evidence of dishonour.

Journal Entry :-
Noting Charges A/c Dr.
          To Bills Payable A/c.

Which of the following is not correct ?

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. Discount on bills discounted is treated as financial expense and is debited to P and L Account.

  2. For unsold stock lying with the consignee, no entry is made in his books.

  3. Loss of stock is said to be abnormal when such loss is natural and is due to inherent characteristics of the commodities.

  4. The abnormal loss on consignment is credited to Consignment Account.

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Correct Option: C

Noting charges is borne by _______.

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

  2. Drawer

  3. Endorser

  4. None

Show answer
Correct Option: B
Explanation:

Noting charges are the amounts paid by the drawer to notary , who warns the drawee of the bill to get clear in a specific time period .

when endorsed bill is dishonored ______ A/c is Debited.

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

  2. Endorser

  3. Bank

  4. None

Show answer
Correct Option: A
Explanation:

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

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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