Question by C.A. (Dr.) G.S.Grewal – Series 11
- A person who endorse a bill is called Endorser.
2.Bill of exchange signs by ________________.
- Bill of exchange is drawn for 4 months on 2nd February, 2019. The due date of bill of exchange will be:-
(a) 2nd June, 2019
(b) 3rd June, 2019
(c) 5th June, 2019
(d) 6th June, 2010
Answer – Series 11
Reason Bill of Exchange can be passed on to another person by endorsement. The primary liability on a bill of exchange is that of the acceptor. If he does not pay, a holder can recover the amount from any of the previous endorsers or the drawee.
Reason: The due date of each bill is calculated as follows:
The period of 4 months expires on 2nd June, 2019. Add to it 3 Grace Days. Thus, the due date is 5th June, 2019.
Question – Series 30
- Ram draws a bill on Shyam which is ‘Bill at Sight’ on 28th March, 2019. The bill shall be due for payment on 1st April, 2019.
- A Bill was drawn on 21st Aug, 2018 for one month, if Maturity Date is declared national holiday then due date will be _______________.
- Noting charges are paid by
(c) Holder of bill
(d) Notary Public
Answer – Series 30
Reason: Bill at sight means the instruments in which no time for payment is mentioned. Also days of grace are not added for computing due date.
- 25th September, 2019
Reason: If the bill is dishonoured, the party that gives the bill has to be debited since it becomes liable to pay the amount including noting charges (if paid). So it is clear that holder of bill has to pay the noting charges first.
Question – Series 37
- A person who endorses a bill is a payee.
- Bills Receivable is a ____________________ Account.
- Which of these parties can be payee also:
(d) All of the above
Answer – Series 37
Reason: Bill of Exchange when passed on to another person is known as endorsement. Thus, the person endorsing the bill is endorser and not payee.
Reason: Bill of Exchange is an “instrument in writing containing an unconditional order signed by the maker directing a certain sum of money only to or to the order of a certain person or to the bearer of the instrument”.
The party which makes the order is known as the drawer, the party which accepts the order is known as the acceptor and the party to whom the amount has to be paid is known as the payee. The drawer and the payee can be the same.
Question – Series 41
- Bill of Exchange are covered by Sale of Goods Act, 1930.
- Bill Receivable Account is ________________ Account.
- On acceptance of Bill of Exchange by Drawee, Drawer debit
(a) Bill Receivable A//c
(b) Bill Payable A/c
(c) Drawee’s A/c
(d) Endorsee A/c
Answer – Series 41
Reason: Bill of Exchange is an order is accepted in writing on the face of the order itself, it becomes a valid bill of exchange and a negotiable instrument. Law in relation to Bills of Exchange is Negotiable Instrument Act, 1881.
Reason: Acceptance of bill of exchange means drawee has extinguished his liability replacing it with the bill of exchange. On receipt of the bill of exchange, a new asset comes into existence for the drawer. He will thus, debit Bill Receivable Account.
On receipt of Bill, drawer records the following entry:
Bills Receivable A/c …Dr.
To Creditor’s A/c
Question – Series 42
- Endorsement of bill means transfer of right on bill from Drawer to Creditor.
- The term of bill means ________________ of the Bill.
- Which entry is passed in Drawee’s Books when the bill is discounted with bank?
(a) Bills Payable A/c …Dr.
To Bank A/c
(b) Bills Payable A/c …Dr.
To Drawer’s A/c
(c) Drawer’s A/c …Dr.
To Bills Payable A/c
(d) No entry is recorded
Answer – 42
Reason: A Bill of Exchange can be transferred to another person by endorsement. It is an asset for the drawer or the payee, which it may transfer to settle his liability.
Reason: Drawee will not record the entry for discounting the bill because it is an asset of the Drawer or the Payee. Drawee records the entry only at the time of maturity either on payment or renewal.
Question – Series 71
- The party which is ordered to pay the amount is known as drawee.
2 Three days are added for ascertaining the date of maturity. These days are known as days of ______________.
- A 4 months bill drawn on 1st January, 2019 will mature for payment on
(a) 3rd May, 2019
(b) 4th May, 2019
(c) 5th May, 2019
(d) 6th May, 2019
Answer – Series 71
Reason: Drawee is the person on whom the Bill of Exchange is drawn for his acceptance. He is a person to whom credit has been granted by the drawer of the bill of exchange.
Reason: Due date is 1st May, 2019. By adding 3 days of grace the maturity date will be 4th May, 2019.