Chapter -4 Bills of Exchange

1) A Bill of exchange is called a by one who is liable to pay it on the due date.
(a) Bills Receivable (b) Bills Payable
(c) Draft (d) Promissory Note
2) On acceptance of the bill the drawee debit which of these accounts.
(a) Drawer’s A/c (b) Bills Receivable A/c
(c) Bills Payable A/c (d) Endorsee A/c
3) The person, other than the original creditor, to whom the amount in the bill is made payable is
known as the_______of the bill.
(a) Holder (b) Payee
(c) Drawer (d) Endorsee
4) In which of these ways a bill of exchange cannot be disposed off?
(a) Discounting with bank (b) Retain till maturity
(c) Endorsement to creditors (d) Destroying
5) A sold goods to B for Rs. 20,000. A will grant 5% discounted to B. B requested A to draw a bill. The
amount of bills will be:
(a) Rs. 20,000 (b) Rs. 19,000
(c) Rs. 19,200 (d) Rs. 18,000
6) X draws a bill on Y. X endorsed the bill to Z. The payee of the bill will be:
(a) X (b) Y
(c) Z (d) None
7) On 1.1.22 X draws a bill on Y for Rs.20,000 for 3 months due date of the bill will be:
(a) 01.04.2022 (b) 03.04.2022
(c) 04.04.2022 (d) 04.05.2022
8) On 1.8.22 X draw a bill on Y “for 30 days after sight”. The date of acceptance is 8.8.22. The due
date of the bill will be:
(a) 08.09.2022 (b) 10.09.2022
(c) 11.09.2022 (d) 09.09.2022
9) On 16.06.22 X draws a bill on Y for Rs. 25,000 for 30 days. 19th July is public holiday, due date of
the bill will be:
(a) 19th July (b) 18th July
(c) 17th July (d) 20th July
10) On 15.8.22 X draws a bill on Y for 3 months for Rs.50,000. 18th Nov was a sudden holiday, due date
of the bill will be:
(a) 17th November (b) 18th November
(c) 19th November (d) 15th November
11) A draws a bill on B for Rs. 50,000. A endorsed it to C in full settlement of Rs. 50,500 Noting charges
of Rs. 200 as the bill returned dishonoured. A want to pay the amount to C at 2% discount. The
amount to be paid by A to C will be:
(a) Rs. 49,000 (b) Rs. 49,490
(c) Rs. 49,686 (d) Rs. 50,500
12) Ram sells goods for Rs. 1,00,000 to Hari on 1st January 2006 and on the same day draws a bill on
Hari at three months for the amount. Hari accepts it and returns it to Ram, who discounts it on 4th
January ,2006 with his bank at 12% per annum. the discounting charges are:
(a) Rs. 12,000 (b) Rs. 4,000
(c) Rs. 3,000 (d) Rs. 6,000
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13) On 01.06.22 X draw a bill on Y for Rs. 15,000 for 3 months. At maturity Y request X to accept Rs.
5000 in cash and for the balance to draw a fresh bill for 2 months together with 12% p.a.
Interest, amount of interest will be:
(a) Rs. 200 (b) Rs. 300
(c) Rs. 240 (d) Rs. 380
14) Who bears the interest charges on renewal of a bill of exchange on dishonour?
(a) Drawer (b) Payee
(c) Drawee (d)Endorsee
15) A bill of 12,000 was discounted by A with the banker for 11,880. At maturity, the bill returned
dishonored, noting charges Rs. 20. How much amount will the bank deduct from A’s bank balance at
the time of such dishonor?
(a) Rs. 12,000 (b) Rs. 11,880
(c) Rs. 12,020 (d) Rs. 11,900
16) Which of the following statements is true?
Noting charge is an expense to be borne by drawer
Noting charge is an expense to be borne by drawee
Noting charge is an expense to be borne by payee
Noting charge is an expense to be borne by bank
17) On 1.1.22 X draw a bill on Y for Rs.50,000. on maturity, the bill returned dishonoured as Y become
insolvent and 40 paise per rupee is recovered from estate. The amount recovered is:
(a) Rs. 20,000 (b) Rs. 30,000
(c) Rs. 50,000 (d) Nil
18) A draws a bill on B for Rs.50,000 for 3 months. At maturity, the bill returned dishonoured, noting
charges Rs.500, 40 paise in a rupee is recovered from B’s estate. The amount of deficiency to be
recorded on insolvency in the books of B will be:
(a) Rs. 20,200 (b) Rs. 30,300
(c) Rs. 19,800 (d) Rs. 19,000

19) Retirement of bill means:
(a) Making payment before the due date
(b) Cancellation of the bill
(c) Sending the bill for collection
(d) Endorsing the bill in favour of third party
20) Bills receivable book is a part of the:
(a) Ledger (b) Balance Sheet
(c) Journal (d) Profit & Loss A/c
21) A bill before acceptance is:
(a) Promissory Note (b) Credit Note
(c) Draft (d) Negotiable Instrument
22) Under which circumstances drawer and payee is same:
(a) When Drawer discounted the bill with banker
(b) When Drawer endorses the bill to the third party
(c) When Drawer had the bill till maturity
(d) When Drawee rejects to accept the bill
23) At the time of discharge of bill, the acceptor debits:
(a) Bills Receivable A/c (b) Bills payable A/c
(c) Discount A/c (d) Drawee A/c
24) Which of the following statement is true:
(a) Creditors can draw a bill on Debtors
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(b) Debtors can draw a bill on Creditors
(c) Bank will draw a bill on customer at the time of overdraft
(d) One can draw the bill on another under any circumstances
25) On dishonour of a bill received through endorsement, debit is given to which of these accounts:
(a) Endorser’s Account (b) Payee’s A/c
(c) Acceptor’s A/c (d) Bills payable A/c
26) X draws a bill on Y for Rs.30,000 on 1.1.22. X accepts the same on 4.1.22. Period of the bill 3 months
after date. What will be the due date of the bill:
(a) 4.4.22 (b) 3.4.22
(c) 7.4.22 (d) 8.4.22
27) On 15.8.22 X draws a bill on Y for 3 months for Rs.50,000. 18th Nov was a sudden holiday, due date
of the bill will be:
(a) 17th November (b) 18th November
(c) 19th November (d) 15th November
28) The cash allowance provided by the drawer to the drawee for the pre-payment of the bill is known
as:
(a) Discount (b) Rebate
(c) Commission (d) Bad Debts
29) On 1.1.22 Vikas draws a bill of exchange for Rs.10,000 due for payment after 3 months on Ekta. Ekta
accepts to this bill of exchange. On 4.3.22, Ekta retires the bill of exchange at a discount of 12%
p.a. Which of the discount is correct for premature payment in the books of Ekta?
(a) Rs. 120 (b) Rs. 100
(c) Rs. 140 (d) Rs. 160
30) On 1.1.22 X draws a bill on Y for Rs.30,000. At maturity Y request X to draw a fresh bill for 2 months
together with 12% p.a. interest. Nothing charges Rs.100. The amount of interest will be:
(a) Rs. 600 (b) Rs. 602
(c) Rs. 500 (d) Rs. 550
31) The renewal of a bill before dishonour implies that the ___ must be first cancelled.
(a) Cheque (b) Original Sales Bill
(c) Credit Note (d) Old Bill
32) On 1.1.22 X draw a bill on Y Rs.50,000 for 3 months. X got the bill discounted 4.1.22 at 12% rate. The
amount of discount will be:
(a) Rs. 1,500 (b) Rs. 1,600
(c) Rs. 1,800 (d) Rs. 1,450
33) A drew a bill on B for Rs. 50,000 for 3 months. Proceeds will be shared equally. A got the bill
discounted at 12% p.a. and remits required proceeds to B. The amount of such remittance will be:
(a) Rs. 24,250 (b) Rs. 25,000
(c) Rs. 16,167 (d) Rs. 32,333
34) Mr. Bobby sold goods worth Rs.25,000 to Mr. Bonny. Bonny immediately accepted a bill on 1.11.22,
payable after 2 months. Bobby discounted this bill @ 18% p.a. on 15.11.22. On the due date Bonny
failed to discharge the bill. Later on, Bonny became insolvent and 50 paise is recovered from Bonny’s
estate. How much amount of bad debt will be recorded in the books of Bobby:
(a) Rs. 12,500 (b) Rs. 9,437
(c) Rs. 11,687 (d) Rs. 13,650
35) Mr. X accepted a bill of exchange of Rs.15000 drawn by Y and payable in 3 months. He got it
discounted from bank at 2% discount. On the due date X failed to pay the bill as he was adjudged
insolvent. A final dividend of 0.25 in a rupee was received from his estate. What would be discounting
charges?

(a) Rs. 300 (b) Rs. 250
(b) Rs. 230 (d) Rs. 220

36) On June 5, 2022 X he draws a bill three months on Y for Rs. 5,000 against sale of goods. Y accepts
the bill. In the Books of X, the entry will be:
(a) Y A/c 5,000
To Bills Receivable A/c 5,000

(b) Y A/c 5,000
To Bills Payable A/c 5,000

(d) Bills Receivable A/c 5,000
To Y A/c 5,000

37)

38)

39)

40)

41) A bill drawn in India and made payable in Japan.
(a) Foreign Bill (b) Inland Bill
(c) Bill at Sight (d) Demand Bill

42) At the time of endorsement of a bill the drawee debits:
(a) Bills Payable A/c (b) Other Parties A/c
(c) No Entry (d) Endorsee A/c

43) Find out who can draw the bill if Mr. A sold goods to B.
(a) A will draw a bill on B (b) B will draw a bill on A
(c) Third Party will draw a bill on A (d) None

44) Bills Receivable Account is a:
(a) Nominal A/c (b) Personal A/c
(c) Real A/c (d) None

45) How many days grace period is given for payment of a bill of exchange?
(a) 3 days (b) 7 days
(c) 15 days (d) 21 days

46) Payment of Bills of Exchange is received by:
(a) Drawer (b) Endorsee
(c) Holder in the course of due date (d) Bank

47) Acceptance of the bill is given by:
(a) Creditor (b) Bank
(c) Debtor (d) Seller

48) At the time of drawing a bill, the drawer credits:
(a) Debtors A/c (b) Creditor’s A/c
(c) Bills Receivable A/c (d) Bills Payable A/c

49) Which of these is not an essential requirement of a valid bill of exchange?
(a) Acceptance (b) Consideration (c) Specific Sum Payable (d) Writing

50) A draws bill of Rs. 1,000 on Mr. B accepts .it and returns it to Mr. A. Mr. A discount the bill for Rs.
960 at a discount of Rs. 40. A remits half of the proceeds to Mr. B i.e.
(a) Rs. 480 (b) Rs. 500 (c) Rs. 20 (d) Rs. 1,000

ANSWERS:
1) (c)
2) (a)
3) (b)
4) (d)
5) (b)
6) (c)
7) (c)
8) (b)
9) (b)
10) (c)
11) (c)
12) (c)
13) (a)
14) (c)
15) (c)
16) (b)
17) (a)
18) (b)
19) (a)
20) (c)
21) (c)
22) (c)
23) (b)
24) (a)
25) (a)
26) (a)
27) (c)
28) (b)
29) (b)
30) (b)
31) (d)
32) (a)
33) (a)
34) (a)
35) (a)
36) (d)
37) (c)
38) (c)
39) (c)
40) (d)
41) (a)
42) (c)
43) (a)
44) (c)
45) (a)
46) (c)
47) (c)
48) (a)
49) (b)
50) (a)