Very Short Answer Type Questions - Bills of Exchange Commerce Notes | EduRev

Crash Course of Accountancy - Class 11

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Commerce : Very Short Answer Type Questions - Bills of Exchange Commerce Notes | EduRev

The document Very Short Answer Type Questions - Bills of Exchange Commerce Notes | EduRev is a part of the Commerce Course Crash Course of Accountancy - Class 11.
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Q1. Define the Bill of Exchange.

Ans. Bill of Exchange is an instrument in writing containing an unconditional order signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the hearer of the instrument.


Q2. Define a Promissory Note.

Ans. A Promissory Note is an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking signed by the maker to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument.


Q3. Give one special feature of promissory note.

Ans. No acceptance is required for promissory note.


Q4. Distinguish between a Bill of Exchange and a Promissory Note. (Two points)

Ans.

(i) In the case of Bill of Exchange, creditor is the drawer while in the case of Promissory Note debtor is the drawer.

(ii) Bill of Exchange contains an order to pay while Promissory Note contains a promise to pay.


Q5. Who are the parties to a Bill of Exchange?

Ans. Bill of Exchange has three parties namely Drawer, Drawee and Payee.


Q6. Who are the parties to a Promissory Note?

Ans. Promissory Note has two parties namely the promissor and Payee.


Q7. What are Trade Bills?

Ans. When the bills of exchange are drawn and accepted for a genuine trade transaction, these are called Trade Bills.


Q8. Explain the Discounting a Bill of Exchange.

Ans. Discounting a Bill of Exchange means taking the amount from a bank against the bill before its due date. The bank charges interest for the remaining period of the bill.


Q9. What are the different options available to the receiver of a Bill of Exchange?

Ans.

(i) Retain the Bill till maturity.

(ii) Discounting the Bill with the Bank.

(iii) Endorse the Bill in favour of a creditor.

(iv) Send the Bill for collection.


Q10. Ashok drew on Rakesh three Bills of Exchange respectively on 29th, 30th and 31st January, 2013. The term in each case is 1 month. What will be the due date of payment in each case?

Ans. 2nd March.


Q11. What do you understand by Days of Grace? Or How many Days of Grace are added to the period of Bills of Exchange?

Ans. Days of Grace are three extra days added to the period of Bill. It is a custom to add the Days of Grace.


Q12. What is meant by Retiring a Bill under Rebate?

Ans. Retiring a Bill means that the Drawee pays the Bill before its due date.


Q13. What is meant by Renewal of a Bill?

Ans. Renewal of a Bill of Exchange means substituting the old bill with a New Bill.


Q14. What is meant by Noting of Bill of Exchange?

Ans. Noting of a Bill means getting the Bill notified and protested on its dishonour with the Notary Public.


Q15. How is the time of payment of a Bill of Exchange calculated?

Ans. In the case of Bill which is payable ‘on demand’ or ‘at sight’, Days of Grace are not allowed. In all other cases Days of Grace are allowed. If the maturity date falls on a day that is a ‘public holiday’, the maturity date is the preceding business day.


Q16. Mention three advantages of a Bill of Exchange.

Ans. Three advantages of Bill of Exchange are:

(i) Purchase and sale of goods on credit is not difficult.

(ii) Bill of Exchange can be discounted thus, liquidity is available.

(iii) Creditors can be paid by endorsement of Bill of Exchange.


Q17. What is meant by Dishonour of a Bill of Exchange?

Ans. Dishonour of Bill of Exchange means that the acceptance is not met (paid) on maturity.


Q18. Explain the term of Date of Maturity.

Ans. Date of Maturity means the date when the bill is due for payment.


Q19. What is the meaning of ‘rebate’ with reference to Bills of Exchange? Or What is retiring a bill under rebate?

Ans. Rebate is a discount allowed by the drawer to the drawee when he accepts the payment of the bill before its due date.


Q20. What is bill at sight?

Ans. Bill at sight means the bill in which no time for payment is mentioned. It is pays on demand, i.e., when presented.

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