Test: Bills Of Exchange And Promissory - 1 - Commerce MCQ

50000 × 12% ×3/12=1500=50000-1500 =48500(All partners equally)=48500/2 =24250.

Given:
- Vimal sold goods worth Rs. 20,000 to Renu on 1st January 2006.
- A bill was drawn on Renu for 3 months.
- Renu accepted the bill and returned it to Vimal.
- Vimal discounted the bill with the bank on 4th February 2006 at 15% p.a.
To find: The discounting charges
Calculation:
- The bill is drawn for 3 months, which means it will mature after 3 months from 1st January 2006.
- The maturity date of the bill will be 1st April 2006.
- The time period between 4th February 2006 and 1st April 2006 is 2 months.
Formula:
Discounting charges = (Bill amount * Rate of interest * Time) / 100
Substituting the given values:
Discounting charges = (Rs. 20,000 * 15% * 2) / 100
Discounting charges = Rs. 6,000
Therefore, the discounting charges will be Rs. 6,000.
Hence, the correct answer is option C: Rs. 500.

A bill of exchange often includes three parties—the drawee is the party that pays the sum, the payee receives that sum, and the drawer is the one that obliges the drawee to pay the payee. A bill of exchange is used in international trade to help importers and exporters fulfill transactions.

The correct option is Option B.

On 1st August 2005, X draws a bill Y “for 30 days after sight”. The date of acceptance is 8th August, 2005. So, the due date of the bill will be 10.9.05

Given:
Bill amount (B) = Rs. 12,500
Discount rate (R) = 12% p.a.
Time (T) = 3 months
To find: Discounting charges borne by Shyam
Formula:
Discount (D) = B * R * T / 100
Calculation:
Substituting the given values into the formula, we get:
D = 12,500 * 12 * 3 / 100
D = 4,500
Therefore, the discounting charges borne by Shyam is Rs. 4,500.
Conclusion:
The correct option is A: Rs. 375.

Answer:
Dishonour of a bill is recorded in the Bills Receivable Book. Here is a detailed explanation:
Bills Receivable Book:
- The Bills Receivable Book is a subsidiary book that records all the bills received by a company.
- It is used to keep track of the bills that are due to be received by the company from its debtors.
- When a bill is dishonored, it means that the debtor has failed to make the payment on the due date.
- Dishonored bills need to be recorded in the Bills Receivable Book to maintain accurate and up-to-date records of the company's financial transactions.
Other Options:
- Cash Book: The Cash Book is a subsidiary book that records all cash transactions. It is used to record the inflow and outflow of cash.
- Sales Book: The Sales Book is a subsidiary book that records all sales made by the company. It is used to keep track of the sales revenue generated.
- Purchase Book: The Purchase Book is a subsidiary book that records all purchases made by the company. It is used to keep track of the expenses incurred for purchasing goods or services.
Conclusion:
In conclusion, the dishonor of a bill is recorded in the Bills Receivable Book. This book is specifically used to record all bills received by the company and is essential for maintaining accurate financial records.

Purpose of Accommodation Bill:

The purpose of an accommodation bill is to:

A. Finance actual purchase or sale of goods:
- An accommodation bill does not finance the actual purchase or sale of goods. It is not directly related to the transaction itself.
B. Facilitate trade transmission:
- An accommodation bill is used to facilitate the transfer of funds between parties involved in a business transaction.
- It helps in providing short-term financial assistance when one party needs funds to complete a trade.
C. Help when both parties are in need of funds:
- The primary purpose of an accommodation bill is to provide financial assistance when both parties involved in a trade require funds.
- It helps in maintaining the flow of trade by providing temporary financial support to the parties involved.
D. None of the above:
- This option is incorrect as the accommodation bill serves a specific purpose in facilitating trade finance.
Therefore, the correct answer is C. When both parties are in need of funds.

If due date falls on a public holiday, the due date is preceding business day and if proceeding day also a public holiday, the due date will be preceding the previous day. For example, the due date of a bill is August 15, which is a public holiday; the preceding day is August 14.

To calculate the amount that can be recovered, we need to consider the percentage of the bill that can be recovered and multiply it by the original bill amount.
Given:
Bill amount = Rs. 50,000
Percentage recovered = 40% (40 paisa in a rupee)
To calculate the amount that can be recovered, we can use the following formula:
Amount recovered = (Percentage recovered / 100) * Bill amount
Substituting the given values into the formula, we get:
Amount recovered = (40 / 100) * 50,000
= (0.4) * 50,000
= Rs. 20,000
Therefore, the amount that can be recovered is Rs. 20,000.
Hence, the correct answer is option A: Rs. 20,000.

Answer:
Explanation:
The changes levied on dishonour of an endorsed bill by the Notary Public are to be borne by the person responsible for the dishonour. Here is a detailed explanation:
Key Points:
- The dishonour of an endorsed bill refers to the refusal or failure to accept or pay the bill when it is presented for payment.
- The Notary Public is responsible for noting the dishonour of the bill and recording it in their register.
- The changes levied on dishonour refer to any fees or expenses incurred by the Notary Public for their services in noting the dishonour.
- The person responsible for the dishonour is the party who failed to accept or pay the bill. This could be the drawer of the bill or any subsequent endorser.
- The holder of the bill, who is the party presenting the bill for payment, is not responsible for bearing the changes levied by the Notary Public.
Therefore, the correct answer is: D: Person responsible for dishonour

Let's calculate the amount received on account of the bill:

Step 1: Calculate the discount amount

• Discount rate = 15% p.a.


• Time period = 3 months = 3/12 years


• Simple interest = Principal * Rate * Time


• Discount = Simple interest on Rs. 10,000 for 3/12 years at 15% p.a.


• Discount = (10000 * 15 * 3/12) / 100 = Rs. 375

Step 2: Calculate the amount received

• Amount received = Principal - Discount


• Amount received = Rs. 10,000 - Rs. 375 = Rs. 9,625

Therefore, the amount received on account of the bill will be Rs. 9,625. So, option B is the correct answer.

To find the amount of interest, we need to calculate the interest on the first bill of Rs. 30,000 for 3 months and the interest on the second bill of the remaining amount for 2 months.
First Bill:
Principal (P) = Rs. 30,000
Time (T) = 3 months
Rate of interest (R) = ?
Simple Interest (I) = ?
Using the formula for simple interest: I = P * R * T / 100
30,000 = 30,000 * R * 3 / 100
R = 10%
Second Bill:
Principal (P) = Rs. 20,000 (Remaining amount after deducting Rs. 10,000 from the first bill)
Time (T) = 2 months
Rate of interest (R) = 12% p.a. = 1% per month
Simple Interest (I) = ?
Using the formula for simple interest: I = P * R * T / 100
I = 20,000 * 1 * 2 / 100
I = Rs. 400
Therefore, the amount of interest will be Rs. 400.

Explanation:
When a bill receivable is endorsed, it means that the holder of the bill transfers the right of receiving the money from the bill to another party. This endorsement can be done in favor of a creditor who is owed money by the holder of the bill.
In this scenario, the bill receivable is being transferred to a creditor. Therefore, the accounting entry for the endorsement of a bill receivable would be:
Creditors A/c (because the creditor is being given the right to receive the money from the bill)
- This account is credited because the creditor is gaining an asset (the right to receive money)
Bills receivable A/c (because the bill receivable is being transferred)
- This account is debited because the bill receivable is being reduced or transferred to the creditor
The correct answer is B: Creditors A/c.

Correct option is B. Rs. 30,300
Bill amount = 50000
(+) Noting charges = 500
Bill amount = 50500
Recovered from B's estate = 50500*0.40 = 20200
Amount of deficiency to be recorded on insolvency = 50500 - 20200 = 30300
Hence b is the correct answer.

Explanation:
The period of days of grace in cash of a bill refers to the extra time given to the debtor to make payment after the due date without incurring penalties or defaulting on the bill. In this case, the correct answer is option A: Three days.
Here is a detailed explanation:
Days of Grace:
- Days of grace is a provision in many bills of exchange or promissory notes that allows the debtor an additional period of time to make payment without incurring any penalties or consequences.
- It is a period of time beyond the due date during which the debtor can still make payment and fulfill their obligation.
Length of the Period:
- The length of the days of grace period can vary depending on the terms and conditions of the bill or promissory note.
- In this case, the period of days of grace is specified as three days.
Implications:
- If the debtor makes payment within the three-day grace period, they will not be considered in default and will not face any penalties.
- However, if the debtor fails to make payment within the grace period, they will be in default and may face consequences such as late payment fees or legal action.
Conclusion:
- The period of days of grace in cash of a bill is three days, as stated in option A.

To find out the amount deducted from A's bank balance at the time of dishonour, we need to consider the following:
1. The bill was discounted by A with the banker for Rs. 11,880.
2. The bill returned dishonoured, noting charges of Rs. 20.
Now let's calculate the amount deducted from A's bank balance:
- The bill was discounted for Rs. 11,880, which means A received Rs. 11,880 from the banker.
- However, the bill returned dishonoured, so A needs to pay back the discounted amount to the banker.
- Additionally, A also needs to pay the noting charges of Rs. 20.
Therefore, the total amount deducted from A's bank balance at the time of dishonour is:
Discounted amount + Noting charges = Rs. 11,880 + Rs. 20 = Rs. 11,900.
So, option C, Rs. 11,900, is the correct answer.

Explanation:
When bills payable are discounted in cash by a creditor, it means that the creditor is providing a cash advance against the bills payable. In this scenario, the entry to record the transaction is as follows:
Journal Entry:
- Debit: Cash (to record the amount received from the creditor)
- Credit: Bills Payable (to reduce the liability)
The journal entry is the initial recording of the transaction and is not shown in any specific book or ledger. However, the effects of this transaction will be reflected in the respective accounts in the ledger.
Therefore, the correct answer is No entry required (Option D).

Journal Entry in the books of 'A' when 'B' does not accept the bill drawn by 'A':

When 'A' draws a bill on 'B', but 'B' does not accept the same, no entry will be required or passed in the books of 'A'.

Reason:

When a bill is drawn on someone, it implies that the person on whom the bill is drawn is liable to accept and pay the bill on its maturity. However, if 'B' does not accept the bill drawn by 'A', it means that 'B' is not liable for the payment of the bill.

As a result, 'A' cannot record any entry related to the bill in its books because the bill has not been accepted by 'B' and has no value as an asset for 'A'.

Therefore, the correct answer is No entry will be required/Passed (Option D).

When a shareholder fails to pay any amount due on the calls on the due date, this amount is transferred to calls in arrear account.

To determine the maturity date of the bill, we need to consider the terms stated on the bill and calculate the number of days after the acceptance date.
Given information:
- The bill is drawn on 1.8.05.
- The bill states "for 30 days after sight".
- The date of acceptance is 8.8.05.
To calculate the maturity date, we follow these steps:
1. Calculate the number of days between the draw date and the acceptance date:
- Draw date: 1.8.05
- Acceptance date: 8.8.05
- Number of days: 8
2. Add the number of days stated on the bill to the acceptance date:
- Number of days after sight: 30
- Acceptance date + Number of days after sight: 8.8.05 + 30 days = 7.9.05
3. Adjust the date to the next business day if the maturity date falls on a non-business day:
- The maturity date of 7.9.05 falls on a Sunday (non-business day).
- The next business day after Sunday is Monday.
- Therefore, the maturity date is 10.9.05.
Therefore, the correct answer is B: 10.9.05.

Calculation of Interest:
To calculate the interest, we need to consider the following factors:
1. Principal Amount: Rs. 10,000
2. Rate of Interest: 12% per annum
3. Time Period: 2 months
Step 1: Calculate the interest for 2 months:
Since the time period is given in months, we need to convert the annual interest rate to a monthly rate.
Monthly Interest Rate = Annual Interest Rate / 12
= 12% / 12
= 1%
Step 2: Calculate the interest for 2 months:
Interest = (Principal Amount * Rate of Interest * Time Period) / 100
= (10,000 * 1 * 2) / 100
= 200
Therefore, the amount of interest will be Rs. 200. Hence, option A is the correct answer.

Given Information:
- X sold goods to Y for Rs. 1,00,000.
- Y paid cash Rs. 30,000.
- X will grant 2% discount on the balance.
- Y requests X to draw a bill for the balance amount.
To find:
The amount of the bill that X will draw for the balance.

1. The total amount of goods sold by X is Rs. 1,00,000.
2. Y has paid cash of Rs. 30,000, so the balance amount is Rs. 1,00,000 - Rs. 30,000 = Rs. 70,000.
3. X will grant a 2% discount on the balance amount.
4. The discount amount can be calculated as 2% of Rs. 70,000, which is (2/100) * Rs. 70,000 = Rs. 1,400.
5. The bill amount will be the balance amount minus the discount amount.
6. Therefore, the bill amount will be Rs. 70,000 - Rs. 1,400 = Rs. 68,600.
Answer:
The amount of the bill that X will draw for the balance is Rs. 68,600. (Option C)

The given information is as follows:
- Kumar draws a bill on Rajat for Rs. 50,000 for mutual accommodation in the ratio of 3:2.
- Rajat accepted the bill.
- Kumar got it discounted for Rs. 47,500.
To find the amount of money Kumar should remit to Rajat, we need to calculate the share of each person in the bill.
Let's calculate the shares:
- The total ratio is 3:2, which means Kumar's share is 3/5 of the total and Rajat's share is 2/5 of the total.
- Kumar's share = (3/5) * Rs. 50,000 = Rs. 30,000
- Rajat's share = (2/5) * Rs. 50,000 = Rs. 20,000
Since Kumar got the bill discounted for Rs. 47,500, he needs to remit the remaining amount to Rajat.
Therefore, the money Kumar should remit to Rajat is:
- Rs. 47,500 - Rs. 30,000 = Rs. 17,500
Hence, the correct answer is option B: Rs. 17,500.

Average in the sense 1.4.03-1.4.07
and 1.4.05 is the average of that.
 

If u give 1.4.03 as and so on 1.4.07

as (1+2+3+4+5)/5 = 3

and 3 years is 1.4.05

Let's break down the information given:

• X draws a bill on Y for 3 months.


• The bill is worth Rs. 20,000.


• The date of drawing the bill is 15.8.05.


• 18th Nov was a sudden holiday.

To calculate the maturity date of the bill, we need to add 3 months to the date of drawing the bill, excluding the holiday.

Steps to calculate the maturity date:

1. Convert the given date into a standardized format (dd/mm/yy).


2. Add 3 months to the drawing date, excluding the holiday.


3. Determine the day of the week for the calculated maturity date.


4. Convert the maturity date back into the given date format (dd.mm.yy).

Let's follow these steps:

Step 1: Convert the given date into a standardized format (dd/mm/yy).

The given date is 15.8.05, which can be written as 15/08/2005.

Step 2: Add 3 months to the drawing date, excluding the holiday.

Since 18th Nov was a sudden holiday, it will not be counted in the calculation. So, we need to find the date that is 3 months after 15/08/2005, excluding 18/11/2005.

To calculate the maturity date, we need to consider the number of days in each month:

• August has 31 days.


• September has 30 days.


• October has 31 days.

So, excluding 18/11/2005, the maturity date will be 15/11/2005.

Step 3: Determine the day of the week for the calculated maturity date.

Using a calendar or a calculator, we can determine that 15/11/2005 was a Tuesday.

Step 4: Convert the maturity date back into the given date format (dd.mm.yy).

15/11/2005 can be written as 15.11.05.

Therefore, the maturity date of the bill will be 15.11.05, which corresponds to option C.

Explanation:
When a sudden holiday occurs, it may affect the maturity date of certain events or transactions. In this case, we are discussing the maturity date.
The maturity date is the date on which a financial instrument or contract expires and must be settled. It is the date when the final payment or delivery is due. However, if a holiday falls on the maturity date, it may impact the settlement process.
Now let's analyze the given options and determine the correct answer:
A: Next following day
- If a sudden holiday occurs, and the maturity date falls on that day, the settlement will be postponed to the next following day after the holiday.
B: Previous day
- If a sudden holiday occurs, and the maturity date falls on that day, the settlement will not be moved to the previous day. The settlement will be postponed to the next following day after the holiday.
C: On the same day
- If a sudden holiday occurs, and the maturity date falls on that day, the settlement will not happen on the same day. It will be postponed to the next following day after the holiday.
D: None of the above
- Since the correct answer is option A, none of the other options applies.
Therefore, in case of a sudden holiday, if the maturity date falls on that day, the settlement will be postponed to the next following day after the holiday.

Liability on account of bills discounted with Bank
Definition:
The liability on account of bills discounted with a bank refers to the amount of money that a bank owes to the entity that has discounted its bills with the bank. It represents the amount that the bank is liable to pay back to the entity when the bills mature.
Treatment:
The correct treatment of liability on account of bills discounted with a bank is as follows:
1. Contingent liability: The liability on account of bills discounted with a bank is considered a contingent liability. This is because the bank's liability to pay back the discounted amount depends on certain conditions being met, such as the bills being honored by the parties involved.
2. Recognition: The liability on account of bills discounted with a bank should be recognized in the financial statements of the entity as a contingent liability. It should be disclosed in the notes to the financial statements.
3. Disclosure: The entity should disclose the nature and amount of the contingent liability on account of bills discounted with a bank in the notes to the financial statements. This helps users of the financial statements to understand the potential financial obligations of the entity.
4. Impact on financial position: The liability on account of bills discounted with a bank does not have an immediate impact on the entity's financial position. It becomes a liability only when the bills are due and payable by the bank. Until then, it remains a contingent liability.
In conclusion, the liability on account of bills discounted with a bank is treated as a contingent liability. It represents the bank's potential obligation to pay back the discounted amount when the bills mature. This liability should be recognized and disclosed in the entity's financial statements.

The correct answer is A: Noting charges are expenses of drawer.
Explanation:
Noting charges are expenses of drawer:
- Noting charges are expenses incurred when a bill of exchange is presented for acceptance or payment and is not accepted or paid.
- These charges are usually borne by the party who presented the bill, which is the holder or the payee, not the drawer.
- Therefore, it is not true to say that noting charges are expenses of the drawer.
The other statements are true:
- The bill of exchange must contain an order to pay: A bill of exchange is a written order from the drawer to the drawee, instructing the drawee to pay a certain amount of money to the payee.
- The drawer and payee can be the same person: In some cases, the drawer and the payee can be the same person. For example, a business owner may issue a bill of exchange to themselves as a way to transfer funds between their personal and business accounts.
- A bill of exchange can be endorsed (i.e. passed on to another person): An endorsement is a signature on the back of a bill of exchange, indicating the transfer of rights to another person. This allows the bill to be passed on to another party, who becomes the new holder and can present it for payment.
In conclusion, the statement that is not true is that noting charges are expenses of the drawer (option A).

Given:
- Mr. A draws a bill on Mr. Y for Rs. 30,000 on 1.1.06 for 3 months.
- X got the bill discounted on 4.2.06 at a rate of 12%.
To find:
The amount of discount on the bill.
Step 1: Calculate the time period for which the bill is discounted.
- The bill was drawn on 1.1.06, and the discount was availed on 4.2.06.
- The time period between these two dates is 34 days.
Step 2: Convert the time period to months.
- As the bill is for 3 months, we need to express the time period in terms of months.
- 34 days = (34/30) months (approximating to the nearest whole number) = 1 month.
Step 3: Calculate the discount amount.
- The discount rate is 12%.
- Formula to calculate the discount amount is: Discount = (Bill amount * Rate * Time)/100.
- Substituting the values, we get: Discount = (30,000 * 12 * 1)/100 = Rs. 3,600.
Therefore, the amount of discount on the bill is Rs. 3,600.
Answer: B: Rs. 600.

Correct Answer :- a

3 months from 1.1.2019 ends on 31st March 2019+3 grace days; hence date of maturity 3.4.2019 (When period of bill is stated in months, calculation will be in months ignoring the days in months).