Tag: dishonour of bills

Questions Related to dishonour of bills

On dishonourment of a bill received through endorsement, debit is given 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. endorser's A/c

  2. payee's A/c

  3. acceptor's A/c

  4. bills payable A/c

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Correct Option: A

Insolvency of the drawee amounts to ________ 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. retirement

  2. renewal

  3. dishonor

  4. all of the above

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Correct Option: C

________ debit noting charges 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. bank

  2. drawee

  3. drawer

  4. endorsee

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Correct Option: B

Refusal or inability of the acceptor to pay the amount of bill is termed as _______.

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. refusal

  2. dishonour

  3. retirement

  4. renewal

Show answer
Correct Option: B
Explanation:

Dishonour of bill happnes when the acceptor of the bill fails to make the payment on the date of maturity of the bill. Hecne, laibility of the acceptor is restored. Entries made for recording dishonour of the bill of exchange are reverse of the entries of recording drawing of the bill.

In the books of drawer:
Acceptor A/c Dr.
             To Bills Receivable A/c
(Bill dishonoured)

In the books of acceptor/drawee:
Bills Payable A/c Dr.
             To Drawer A/c 
(Bill dishonoured)

Dishonour of a foreign bill requires protest if the law of the place ________ requires.

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. where it is drawn

  2. where it is payable

  3. where it is accepted

  4. where the payee reside

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Correct Option: A
Explanation:

A bill which is not an inland bill, is deemed to be a foreign bill. 

Example: (1) A bill of exchange drawn in India, on a person residing outside India and made payable outside India. 
(2) A bill drawn outside India and made payable in India.
(3) A bill drawn outside India, on a person residing in India.
In case of a bill, foreign bills of exchange must be protested for dishonour when such protest is required by law of the place where the bills are drawn.

When noting charges are paid at the time of dishonour of the bill, the drawee always debits ______________ account. 

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

  2. interest

  3. both (A) and (B)

  4. None of the above

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Correct Option: A
Explanation:

When bill of exchange is dishonoured then in order to prove this fact to drawer may get it noted and protested through  a public official  known as a notary  public for which it charges its fees which called noting charges.such charges are recovered from the party responsible for the dishonour and when noting charges is paid at the dishonour of the bill the drawer always debit the noting charges account the journal entry is as :-



 Bills payable A/c ......... Dr.    xx
Noting charges A/c........Dr.    xx
    To Drawer's A/c...............Cr.            xx

Notary public may charge his fee from the __________.

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

  2. drawee

  3. holder of bill of exchange

  4. none of the above

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Correct Option: C

Which of the following is correct for presenting bill through notary public?

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. To pay fees to notary public

  2. For "bill for collection"

  3. It is just to prove that the bill has been properly presented

  4. For drawing a fresh bill

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Correct Option: C

Which of the following statements is true?

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. A bill cannot be endorsed more than two times

  2. A bill is drawn by purchaser

  3. A bill contains an unconditional promise to pay

  4. Noting charges are borne by the drawee in the event of dishonor of bill

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Correct Option: D

Noting fee means __________.

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. charges for noting the bill of exchange in the books of account

  2. payments made to the notary public for recording the fact of the bill getting dishonoured

  3. interest till the maturity date

  4. commission paid to the bank

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Correct Option: B