Q1. Promissory Note requires the acceptance. Comment.
Ans. A Promissory Note does not require acceptance because it is a valuable instrument. A Bill Receivable requires acceptance.
Q2. A bill given to a creditor is called Bill Payable. Why?
Ans. A bill given to a creditor is called Bill Payable because the debtor commits to pay by giving a hill to the creditor.
Q3. A has drawn a bill on B. B accepts the same. Can B endorse the bill to C?
Ans. B cannot endorse the bill to C because he is a Drawee. Only A, the Drawer, can do so.
Q4. Do you think that a cancellation entry is not required when a bill is renewed?
Ans. When the bill is renewed, entries are passed for cancellation of the old bill and then for recording the new bill.
Q5. Cancelling an old bill and drawing a new bill is called Renewal of a Bill. Is this true or false?
Ans. It is true. When the acceptor of a bill fails to make the payment on the due date, a new bill may be drawn on him after cancellation of the old bill. It is known as Renewal of a Bill.
Q6. At the time of renewal of a bill, the Interest Account is debited in the books of the Drawee. Is this true or false?
Ans. Yes, at the time of renewal of a bill, the Interest Account is debited in the books of a Drawee because it represents an expense for the Drawee.
Q7. A bill of Rs. 5,000 is discounted with the banker for Rs. 4,750. The bill is dishonoured at maturity. The drawee pays 60% of his acceptance. What is the amount of Bad Debts?
Ans. Bad Debts = Rs.2,000, i.e., 40% of Rs.5,000.
Q8. Refusal by the acceptor to pay the bill on the maturity date is called the Retirement of the Bill. Comment.
Ans. Refusal by the acceptor to make payment of the bill on the maturity date is not Retirement of the Bill but is Dishonour of the Bill.
Q9. Find the due date of a Bill of Exchange dated 9th December, 2007, payable after 45 days.
Ans. 25th January 2008, because 26th January, 2008 is a public holiday.
Reason: If maturity date falls on a day which is a public holiday or a gazetted holiday, the maturity date of the bill shall be the preceding business day.
Q10. On 13th June, 2010 A draws a bill on B for 50,000 payable after 60 days. What wll be the due date of the bill?
Ans. 14th August 2010, because 15th August is a public holiday.
Q11. A bill is drawn on 5th February 2011 for one month after sight. Its date of acceptance is 12th February 2011. What will be the due date of the bill?
Ans. 15th March, 2011, because the expression ‘after sight’ means that the period beings to run from the date of acceptance.
Q12. What do you mean by ‘Bill at Sight’?
Ans. Bill at sight means payable on demand. Such bills are not entitled to days of grant.
Q13. A bill for 40,000 was discounted by Ganesh with Axis Bank for 38,500. At maturity, the bill was dishonoured and bank notified it for 600. How much amount Axis Bank will deduct from the bank balance of Ganesh at the time of dishonour?
Q14. Radha draws a bill on Lalita for 50,000. She wants to endorse it to Visakha in settlement of 62,000 at 4% discount with the help of Lalita’s acceptance and balance in cash. How much cash Radha will pay to Visakha?
Q 15. X draws a bill on Y for 60,000 for mutual accommodation. X discounted the bill for 57,000 and remitted 19,000 to Y. What amount will be sent by X to Y on due date?
Q16. A bill received from a debtor is called ‘Bills Receivable’. Why?
Ans. Because the debtor commits to pay by giving a bill to the creditor.
Q17. Interest Account is credited in the books of drawee at the time of renewal of a bill. Do you agree?
Ans. No. Interest Account id debited in the books of drawee because it is expense for him.
Q18. A bill for 75,000 is discounted with the bank for 72,000. The bill is dishonoured at maturity? The drawee pays 40% in full settlement. What is the amount of Bad Debts?