Commerce Exam > Commerce Notes > Accountancy Class 11 > Accounting for Bills of Exchange (Part - 1)
Accounting for Bills of Exchange (Part - 1) | Accountancy Class 11 - Commerce PDF Download
Page No 16.35:
Question 1: Calculate the due dates of the bills in the following cases:
ANSWER:
Page No 16.35:
Question 2: On 10th March, 2019, A draws on B a bill at 3 months for ₹ 20,000 which B accepts immediately and returns to A. The bill is honoured due date.
Pass necessary Journal entries in the books of both the parties.
ANSWER:
Page No 16.35:
Question 3: On 1st January, 2019, A sold goods to B for ₹ 5,000 plus IGST @ 18%. A received ₹ 900 by cheque from B and drew on him a bill for the balance amount payable 3 months after date. The bill was duly accepted by B. A retained the bill till due date. On due date, the bill was paid.
Pass Journal entries in the books of A and B. Also, show necessary accounts in the books of both the parties.
ANSWER:
Page No 16.35:
Question 4: Vinod sold goods to Darbara Singh for ₹ 1,000 on 1st January, 2019. He drew on the latter a bill for the amount payable 3 months after date.He discounted the bill with his bank for ₹ 990 on 4th January, 2019. On maturity, the bill is duly met. Make the Journal entries in the books of Vinod and Darbara Singh.
ANSWER:
Page No 16.36:
Question 5: On 1st January, 2019, X sold goods of ₹ 20,000 to Y and drew a bill on Y at three months for the amount. Y accepted the bill. The bill is met on maturity. Pass the necessary Journal entries in the books of X and Y, if X discounted the bill @ 12% p.a. from bank on 4th January.
ANSWER:
Working Notes:
Discounting Charges = ₹ (20,000 × 12/100 × 3/12) = ₹ 600
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FAQs on Accounting for Bills of Exchange (Part - 1) - Accountancy Class 11 - Commerce
| 1. What is a bill of exchange? |  |
Ans. A bill of exchange is a negotiable instrument that is used in commercial transactions. It is a written order from one party (drawer) to another party (drawee) to pay a certain sum of money to a third party (payee) on a specified date or upon demand.
| 2. What are the parties involved in a bill of exchange? | |
Ans. The parties involved in a bill of exchange are:
- Drawer: The person who issues or creates the bill of exchange.
- Drawee: The person or organization upon whom the bill is drawn, and who is responsible for making the payment.
- Payee: The person or organization to whom the payment is to be made.
| 3. What is the purpose of a bill of exchange? | |
Ans. The purpose of a bill of exchange is to provide a written instrument that facilitates the transfer of money between parties in commercial transactions. It allows for the extension of credit or the postponement of payment, providing flexibility and convenience in trade.
| 4. How does a bill of exchange work? | |
Ans. A bill of exchange works by the drawer issuing the bill to the drawee, directing them to make a payment to the payee. The drawee accepts the bill by signing it, thereby acknowledging their obligation to pay the specified amount. The payee can then present the bill for payment at the specified date or upon demand.
| 5. What are the advantages of using a bill of exchange? | |
Ans. The advantages of using a bill of exchange include:
- Flexibility in payment terms: It allows for deferred payment, enabling businesses to manage their cash flow effectively.
- Credit facilitation: A bill of exchange can serve as a credit instrument, allowing businesses to extend credit to their customers.
- Negotiability: A bill of exchange can be transferred to another party, providing a means for the payee to receive immediate payment by selling the bill at a discount.
- Legal protection: Bills of exchange are governed by laws and regulations that provide legal remedies in case of non-payment or dishonor.
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