Bills of Exchange and Promissory Notes

Q1. A bill of exchange is drawn by the ___.
a) Creditor
b) Debtor
c) Bank
d) Buyer
Answer: a) Creditor

Q2. Promissory Note is made by the ___.
a) Payee
b) Drawer
c) Debtor
d) Endorsee
Answer: c) Debtor

Q3. The person to whom the bill is payable is known as ___.
a) Drawer
b) Drawee
c) Payee
d) Endorser
Answer: c) Payee

Q4. Noting charges are borne by the ___.
a) Drawer
b) Drawee
c) Payee
d) Endorser
Answer: b) Drawee

Q5. A bill of exchange must be accepted by the ___.
a) Drawer
b) Payee
c) Drawee
d) Endorser
Answer: c) Drawee

Q6. Which of the following is not a party to a promissory note?
a) Maker
b) Payee
c) Drawee
d) None of the above
Answer: c) Drawee

Q7. Which of these documents involves an unconditional promise to pay?
a) Bill of Exchange
b) Promissory Note
c) Cheque
d) Endorsement
Answer: b) Promissory Note

Q8. When the bill is dishonoured, the noting charges are paid by the ___.
a) Drawer
b) Drawee
c) Endorsee
d) Payee
Answer: b) Drawee

Q9. In case of accommodation bill, the drawee is ___.
a) A real debtor
b) An endorser
c) Not liable
d) A party to help the drawer financially
Answer: d) A party to help the drawer financially

Q10. The duration of a bill is usually:
a) 15 days
b) 90 days
c) 30 days
d) 3 months
Answer: d) 3 months

Q11. Promissory note is made payable ___.
a) By the drawer
b) By the payee
c) By the maker
d) By the endorser
Answer: c) By the maker

Q12. Who is the acceptor of a bill of exchange?
a) Drawer
b) Payee
c) Drawee
d) Endorser
Answer: c) Drawee

Q13. The person who writes and signs a promissory note is called:
a) Endorser
b) Maker
c) Drawee
d) Holder
Answer: b) Maker

Q14. A bill which is drawn and accepted without any consideration is known as:
a) Trade bill
b) Accommodation bill
c) Demand bill
d) Usance bill
Answer: b) Accommodation bill

Q15. When a bill is endorsed, it means:
a) Bill is returned
b) Bill is cancelled
c) Ownership is transferred
d) None of the above
Answer: c) Ownership is transferred

Q16. What is a Bill of Exchange?

Answer: A bill of exchange is a written order by a creditor (drawer) instructing a debtor (drawee) to pay a specified sum of money either on demand or at a fixed future date to a third party (payee) or to the drawer.

Q17. Define a Promissory Note.
Answer: A promissory note is a written promise made by one party (maker) to pay a specific sum of money to another party (payee) either on demand or at a future fixed date.

Q18. What are the essential elements of a valid bill of exchange?
Answer:

• It must be in writing.

• It must contain an unconditional order to pay.

• It must be signed by the drawer.

• The amount must be certain.

• The date of payment should be specified.

Q19. What is the difference between a Bill of Exchange and a Promissory Note?
Answer:

• A bill of exchange involves three parties: drawer, drawee, and payee.

• A promissory note involves two parties: maker and payee.

• A bill of exchange is an order to pay; a promissory note is a promise to pay.