CA Foundation Exam > CA Foundation Questions > Which of the following statement is true:a)No...
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Which of the following statement is true:
- a)Noting charge is an expense to be borne by drawer
- b)Noting charge is an expense to be borne by drawee
- c)Noting charge is an expense to be borne by payee
- d)Noting charge is an expense to be borne by bank
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
Which of the following statement is true:a)Noting charge is an expense...
Explanation:
Noting charge refers to the charges incurred in the process of noting or formalizing a dishonored bill of exchange or promissory note. When a bill of exchange or promissory note is dishonored, the holder of the instrument has the option to have it "noted" or officially recorded by a notary public or a bank.
The correct statement is option 'B', which states that the noting charge is an expense to be borne by the drawee.
Here's an explanation of why option 'B' is the correct answer:
1. Definition of the drawee:
- The drawer is the person who writes the bill of exchange or promissory note.
- The payee is the person to whom the payment is to be made.
- The drawee is the person or organization upon whom the bill of exchange or promissory note is drawn, and who is responsible for making the payment.
2. Responsibility of the drawee:
- The drawee is legally obligated to accept and make payment on the bill of exchange or promissory note.
- If the drawee dishonors the bill or note by refusing to accept or make payment, the holder of the instrument can have it "noted" or officially recorded.
- The noting charge is incurred in this process of noting the dishonor.
3. Expense borne by the drawee:
- The noting charge is an expense incurred due to the default or dishonor of the bill or note by the drawee.
- As the drawee is responsible for making the payment, it is logical for them to bear the expenses associated with the dishonor.
- The noting charge is one such expense that the drawee needs to bear.
4. Other options:
- Option 'A' states that the noting charge is an expense to be borne by the drawer. However, the drawer is the person who initiates the bill or note and is not responsible for its dishonor.
- Option 'C' states that the noting charge is an expense to be borne by the payee. However, the payee is the person who is supposed to receive the payment and not responsible for dishonoring the bill or note.
- Option 'D' states that the noting charge is an expense to be borne by the bank. However, the bank is not responsible for the dishonor of the bill or note unless it is the drawee.
Therefore, the correct statement is option 'B' - the noting charge is an expense to be borne by the drawee.
Noting charge refers to the charges incurred in the process of noting or formalizing a dishonored bill of exchange or promissory note. When a bill of exchange or promissory note is dishonored, the holder of the instrument has the option to have it "noted" or officially recorded by a notary public or a bank.
The correct statement is option 'B', which states that the noting charge is an expense to be borne by the drawee.
Here's an explanation of why option 'B' is the correct answer:
1. Definition of the drawee:
- The drawer is the person who writes the bill of exchange or promissory note.
- The payee is the person to whom the payment is to be made.
- The drawee is the person or organization upon whom the bill of exchange or promissory note is drawn, and who is responsible for making the payment.
2. Responsibility of the drawee:
- The drawee is legally obligated to accept and make payment on the bill of exchange or promissory note.
- If the drawee dishonors the bill or note by refusing to accept or make payment, the holder of the instrument can have it "noted" or officially recorded.
- The noting charge is incurred in this process of noting the dishonor.
3. Expense borne by the drawee:
- The noting charge is an expense incurred due to the default or dishonor of the bill or note by the drawee.
- As the drawee is responsible for making the payment, it is logical for them to bear the expenses associated with the dishonor.
- The noting charge is one such expense that the drawee needs to bear.
4. Other options:
- Option 'A' states that the noting charge is an expense to be borne by the drawer. However, the drawer is the person who initiates the bill or note and is not responsible for its dishonor.
- Option 'C' states that the noting charge is an expense to be borne by the payee. However, the payee is the person who is supposed to receive the payment and not responsible for dishonoring the bill or note.
- Option 'D' states that the noting charge is an expense to be borne by the bank. However, the bank is not responsible for the dishonor of the bill or note unless it is the drawee.
Therefore, the correct statement is option 'B' - the noting charge is an expense to be borne by the drawee.
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Which of the following statement is true:a)Noting charge is an expense...
Nothing charges have to be payed by Drawer, and he have rights to recover the same from PAYEE/DRAWEE.
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Which of the following statement is true:a)Noting charge is an expense to be borne by drawerb)Noting charge is an expense to be borne by draweec)Noting charge is an expense to be borne by payeed)Noting charge is an expense to be borne by bankCorrect answer is option 'B'. Can you explain this answer?
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