MCQs / Q&A

The drawer of a trade bill passes relevant entries with regard to the transaction involved in it. But, in case of an accommodation bill, he passes an entry in addition to the usual entries. The additional entry so passed is with respect to

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The drawer of a trade bill passes relevant entries with regard to the transaction involved in it. But, in case of an accommodation bill, he passes an entry in addition to the usual entries. The additional entry so passed is with respect to

A. Discounting of the bill with the bank
B. Payment of the bill on due date
C. Remitting or receiving the amount
D. Sending the bill to bank for collection
(c ) In case of accommodation bills, the additional entry that is to be passed other than the
usual entries passed with regard to trade bills in the books of the drawer is in respect of (c )
remitting or receiving the amount at the time of discounting the bill and honouring the bill at
maturity. The entries passed are the same in case of discounting the bill with the bank A. and no
additional entry is passed except for sending the of proceeds to the drawee. On payment of
the bill on due date B. no additional entry is passed in the books of the drawer. If the bill is sent to the bank for collection, D. the purpose behind the accommodation bill is defeated. However, no additional entry is required to be passed at the time of sending the bill to the bank for collection D.. Thus, C. is the correct answer.

The noting charges levied on dishonour of an endorsed bill by the Notary Public are to be borne by

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The noting charges levied on dishonour of an endorsed bill by the Notary Public are to be borne by

A. The drawer of the bill
B. The person responsible for dishonour
C. The holder of the bill
D. The endorser of the bill

B. The noting charges are the charges paid to Notary Public for presenting a bill for
payment and to note the fact of dishonour. The charges are to be borne by the person responsible
for dishonour who is none other than the drawee. Thus, the correct answer is B..
The drawer of the bill A. is incorrect answer because the drawer may pay the charges initially but ultimately they are to be borne by the drawee.
The holder of the C. is entitled to receive the payment of the bill and to bear the noting charges on the bill. The endorser D. may be the drawer of the bill in which case he will recover the noting charges from the drawee of the bill. Thus B. is the correct answer.

In the books of the drawer, the accounting treatment involved on receipt of a bill of exchange duly accepted by the drawee is?

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In the books of the drawer, the accounting treatment involved on receipt of a bill of exchange duly accepted by the drawee is?

i. Debit Bills Receivable Account
ii. Debit Drawee‘s Account
iii. Credit Drawee‘s Account
iv. Credit Sales Account
A. Only (i) above
B. Both (ii) and (iv) above
C. Both (i) and (iii) above
D. Both (i) and (iv) above
In the books of the drawer, the accounting treatment involved on receipt of a bill of
exchange duly accepted by the drawee is debit Bills Receivable Account and credit Drawee‘s Account .i.e., the combination of statements in (i) and (iii) alternative C. is the correct answer. The other alternatives are incorrect because the combination of one correct answer with the statement of incorrect answer. Drawee‘s Account is debited (ii) as soon as a sale is made or any advances is made and Drawee‘s Account is not debited when the bill of exchange is accepted and sales is credited (iv) when the sale is made and not at the time of acceptance of bill of exchange. Thus, the alternatives A., statement (i) B., combination of (ii) and (iv) D. combination of (i) and (iv) are incorrect.

When bill discounted with the bank is dishonored?

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When bill discounted with the bank is dishonored?

A. Acceptor‘s Account is debited in the books of drawer
B. Bills Receivable Account is credited in the books of drawer
C. Bank Account is debited in the books of drawer
D. Bills Payable Account is debited in the books of drawer
When a bill discounted with bank has been dishonoured, the drawer debits the Acceptors Account (restores the acceptor status a debtor for the amount due) and credits the Bank Account or Cash Account (the amount he pays to bank). The acceptor debits the Bills Payable Account, the noting charges and credits the Drawer‘s Account (Restores the status quo of the creditor to whom he is due to pay). Hence option A. is correct. All other options are incorrect.