Balbharati solutions for Book-keeping and Accountancy
12th Standard
HSC Maharashtra State Board
Chapter 7
Bills of Exchange
(Negotiable Instruments Act, 1891)
Objective Questions
A. Select the correct option and rewrite the sentence:-
1) The person on whom a bill is drawn is called a
.
a) Drawee b) Payee
c) Drawer
d) Acceptor.
2) Before acceptance the bill is called a
.
a) Order
b) Request
c) Draft
d) Instrument.
3) When the due date of bill drawn falls due on a public holiday, the payment must
be made on the
day.
a) Same
b) preceding c) next
d) any.
4) The due date of the bill drawn for 2 months on 23rd Nov. 2019 will be
a) 23rd Jan. 2020 b) 25th Jan. 2019
c) 26th Jan. 2019
d) 25th Jan. 2020.
5) Nothing charges are borne by
.
a) Notary Public
b) Drawee
c) Drawer
d) Endorsee.
6) There are
parties to bill of exchange.
a) five
b) four
c) three
d) two.
7) When a bill is drawn for 2 months after date on 3rd Jan. 2020, its due date will be
.
a) 3rd Jan. 2020
b) 3rd Mar. 2020
c) 5th Mar. 2020
d) 6th Mar. 2020.
8) Notary Public is
.
a) Govt. Officer
b) Drawer
c) Payee
d) Endorsee
9) When Acceptor or Drawee does not pay the amount of bill to the holder on the due date it
is known as
the bill.
a) returning
b) discounting
c) honouring d) dishonouring.
10) The person who accepts the bill treats the bill as
.
a) Bills Payable
b) Promissory note
c) Draft
d) Bills Receivable.
B. Give one word / phrase / term which can substitute each of the following ststements:-
1) Three extra days which are allowed over and above the term of bill.
2) Fees charged by Notary Public for getting the fact of dishonour noted.
3) A person who is entitled to receive the amount of bill of exchange.
4) A person in whose favour a bill endorsed.
5) Officer appointed by goverment for noting of dishonour of bill.
6) Cancellation of bill on maturity in return of a new bill for extended period of credit.
7) Bill of exchange drawn and accepted without any valuable consideration.
8) Person who is in possession of Bill of Exchange.
9) Conversion of Bill of Exchange into its present value.
10) Amount which is not recoverable from Drawee on account of insolvency.
C. State True or False with reasons:-
1) Inland bill is one which is drawn in one country and payable in another country.
2) Retirement of bill means payment of the bill before due date.
3) Drawee can transfer the ownership of Bill.
4) Acceptance of bill without making any changes in the terms of bill is called qualified
acceptance.
5) Discounting is a device to convert the bill into its present value.
6) A bill of exchange must be presented to the acceptor on the due date.
7) If a bill is discounted by the holder, no entry is passed in his book when bill is honoured
on the due date.
8) Noting charges are to be borne by the drawer.
9) If a bill is drawn payable “on demand” no grace days are allowed.
10) There are three parties to a Promissory Note.
D. Find the odd one:-
1) a) Retaining
b) Noting
c) Discounting
d) Endorsing
2) a) Trade bill
b) Accommodation bill
c) After date bill
d) Demand bill.
3) a) Notary Public
b) Drawer
c) Drawee
d) Payee.
4) a) Discounting charges
b) Rebate
c) Bank charges
d) Noting charges.
5) a) Stamp
b) Acceptance
c) Draft
d) Amount.
E. Complete the sentence:-
1) Making payment of bill before the due date of maturity is known as .................... .
2) Person whose liabilities are more than his assets and is not in position to pay off his
liabilities is .................. .
3) Amount that cannot be paid by acceptor on account of inslovency is known as ....................
4) A bill of exchange payable after certain period is known as .................... .
5) A bill which is drawn and accepted with valuable consideration is known as .....................
6) A person who draws the bill of exchange is known as .................... .
7) A bill whose due date is calculated from the date of acceptance is known as ................
8) Recording the fact of dishonour of Bill is known as .................... .
9) When Drawee accepts the bill payable at a particular place only, it is known as ....................
10) Fees charged by the bank for collection of bill on behalf of holder is .................... .
F.
Answer in sentence:-
1) What do you mean by bill of exchange?
2) What are days of grace?
3) What do you mean by discounting a bill of exchange?
4) What is noting of the bill?
5) What are noting charges?
6) What is relationship between Drawer and Drawee?
7) Who is payee of the bill?
8) What do you mean by rebate?
9) What is legal due date?
10) What is bills payable on demand?
G. Do you agree or disagree with the following statements:-
1) A bill of exchange is a conditional order.
2) The party which is ordered to pay the amount is known as payee.
3) The person in whose favour the bill is endorsed is known as endorsee.
4) Rebate or discount given on retiring a bill is an income to the Drawee.
5) A bill from the point of view of debtor is called Bills payable.
6) In case of bill drawn payable ‘on demand’ no grace days are allowed.
7) A bill is required to be accepted by Drawer.
8) A bill of exchange need not be dated.
9) A bill before acceptance is called Promissory Note.
10) Renewal is request by Drawee to extend the credit period of the bill.
H. Calculations:-
1) Ganesh draws a bill for ` 40,260 on 15th Jan. 2020 for 50 days. He discounted the bill with
Bank of India @15% p.a. on the same day. Calculate the amount of discount.
2) Shefali Traders drew a bill on Maya for ` 30,000 on 1st Oct. 2019 payable after 3 months.
Calculate amount of discount in the following cases:-
i) Shefali Traders discounted the bill on the same day @ 12% p.a.
ii) Shefali Traders discounted the bill on 1st Nov. 2019 @ 12% p.a.
iii) Shefali Traders discounted the bill on 1st Dec. 2019 @ 12% p.a.
3) Veena who had accepted Sudha’s bill for ` 28,000 was declared bankrupt and only 35
paise in a rupee could be recovered from her estste. Calculate the amount of bad debts.
4) Nitin renewed his acceptance for ` 72,000 by paying ` 22,000 in cash and accepting a new
bill for the balance plus interest @ 18% p.a. for 4 months. Calculate the amount of new
bill.
5) Nisha’s acceptance for ` 16,850 sent to bank for collection was honoured and bank charges
debited were ` 125. Find out the amount actually received by Drawer.
6) A bill of ` 16,000 was drawn by Keshav on Gopal on 12th June 2019 for 2 months. What
will be the due date, if all of sudden, the legal due date is declared as emergency holiday?
I.
Prepare the following Specimens :-
1) Prepare a bill of exchange form the following information :
Drawer : Shankar, Vadodara, Gujrat.
Drawee : Vinayak, Somwarpeth, Pune.
Amount : ` 16,000
Period : 3 months
Date of Bill : 6th Sept. 2019.
Date of acceptance : 11th Sept. 2019.
2.
Prepare a bill of exchange from the following information :
Drawer : Dinesh, P. R. Road, Andheri West.
Drawee : Mahesh, L. B. S. Road, Mulund.
Payee : Amit, Thane West.
Amount : ` 9,500
Period of Bill : 4 months after sight.
Date of Bill : 26th Nov. 2019.
Date of acceptance : 29th Nov. 2019.
3.
Kantilal, 343/D, Palm Heights, Jogeshwari, drew a bill on 10th Oct. 2019 for ` 63,490 for 45
days after date on Shantilal, B2, Himalaya Towers, Baramati, payable to Priyanksa, Satara.\
The bill was accepted on 13th Oct. 2019 for 60 days.
Prepare a format of bill of exchange from the above detalis.
4.
Prepare a format of bill exchange from the following details :
Rahul Sane, 86-D, Raviwar Peth, Nagpur accepted the bill drawn on him by Prithviraj, Icon
Heights, Wardha for ` 87,000 on 30th July 2019.
The bill was drawn on 26th July 2019 for ` 1,00,000 for 90 days after date.
5.
Prepare a format of bill of exchange from the followings.
Drawer : Kashmira Shah, Partner M/S Shah and Shah, 2-C, Matruchaya Building, Akola.
Drawee : Dhanashree Traders, Bangalore Road, Belgaum. (Signed by Jayashree, Partner)
Payee : M/S Janki Traders, Akola.
Amount : ` 64,500
Period of Bill : 3 months
Date of drawing : 12th Sept. 2019
Date of acceptance : 15th Sept. 2019
6.
Prepare a demand bill with imaginary Drawer, Drawee, Address , Amount and Date.
1.
On 1st Jan. 2020 Hemant sold goods of ` 18,500 to Nitin. On the same date Hemant drew a bill
of exchange for ` 18,500 at 2 months. On the due date the bill was duly honoured.
Give Journal Entries in the Books of Hemant and Nitin. Prepare Hamant’s account in the
books of Nitin.
2.
Neha sold goods to Rohan ` 42,000 on 6th Sept. 2019. Neha drew a bill of exchange at 3
months for the amount which was accepted by Rohan. Neha disounted the bill with her bankers
at ` 41,000. On the due date of the bill Rohan dishonoured the bill and bank paid ` 300 as
Noting Charges.
Show Journal Entries in the Books of Neha and Rohan.
3.
Jyoti owes ` 31,000 to Swati for which was draws a bill on Jyoti for 2 months. The bill was duly
accepted by Jyoti. Swati sends the bill to bank for collection. Jyoti honoured the bill on the due
date and bank charges ` 475 as bank charges.
Give Journal Entries in the Books of Swati
4.
Pankaj purchased goods of ` 20,000 from Omprakash on credit on 15th April 2019. Omprakash
draws After Sight bill for the amount due on Pankaj for 3 months which was accepted by
Pankaj on 18th April, 2019. On 20th April, 2019 Omprakash endorsed the bill to his creditor
Jagsish in full settlement of his amount ` 21,000. On the due date the bill was dishonoured by
Pankaj.
Give Journal Entires in the Books of Omprakash, Pankaj and Jagdish.
5.
Siddhant sold goods to Sudhir of ` 43,800 on 18th March, 2019. Siddhant draws a bill on Sudhir
on the same day for ` 43,800 for 3 months which was duly accepted by Sudhir. Siddhant
discounted the bill on the same day at 8% p.a. the bill was dishonoured on the due date and
Sudhir requested Siddhant to accept ` 13,800 and interest in cash on remaining amount at 12%
p.a. Siddhant agreed and for the balance amount accepted a new bill at 2 months. Before the
due date of new bill Sudhir retired the bill by paying ` 29,700.
Pass necessary Journal Entries in the Books of Siddhant.
6.
Sangeeta accepted a bill for ` 18,000 drawn by Geeta at 3 months. Geeta discounted the bill
for ` 17,400. Before the due date Sangeeta approached Geeta for renewal of the bill. Geeta
agreed on the condition that Sangeeta should pay ` 6,000 immediately and for the balance she
should accept a new bill for 4 months along with interest ` 550. The arrangements were carried
through. But on the due date of new bill Sangeeta became insolvent and 35 paise in a rupee
could be recovered from her estate.
Give Journal Entries in the Books of Sangeeta and prepare Sangeeta’s account in the
books of Geeta.
7. Priyanka owed Meena ` 18,000, Priyanka accepted a bill drawn Meena for the amount at
4 months. Meena endorsed the same bill to Sagar. Before due date Priyanka approached Meena
for renewal of bill. Meena agreed on condition that ` 6,000 be paid immediately together with
interest on the remaining amount of 8 % p. a. for 3 months and Priyanka should accepte a new
bill for the balance amount. These arrangements were carried through. However, before the
due date Priyanka became insolvent and only 50 % of the amount could be recovered from her
estate.
Give Journal Entries in the Books of Meena.
8.
Seema purchased goods from Roma on credit on 1st August, 2019 for ` 37,000, Seema accepts
bill for 2 months drawn by Roma for the same amount on the same day Roma discounts the
bill with the bank for ` 36,200 on 3rd August 2019. On the due date the bill is dishonoured and
Noting Charges of ` 160 is paid by the bank. Seema pays ` 19,000 and Noting Charges in
cash immediately. A new bill is drawn by Roma for the balance including interest ` 650 for 2
months, which is accepted by Seema. The new bill is retired one month before the due date at a
rebate of ` 300.
Give Journal Entries in the Books of Seema and prepare Seems’s Account in the books of
Roma.
9. Uday purchased goods from Shankar on credit for ` 35,000 at 10 % Trade discount. Uday paid
` 1,500 immediately and for the balance accepted a bill for 3 months. Before due date Uday
approached Shankar with a request to renew the bill. Shankar agreed but with condition that
Uday should accept a new bill for 3 months including interest at 12 % p.a.
Give Journal Entries in the Books of Shankar.
10. Sagar drawn an after sight bill on 21st Nov. 2019 for ` 21,000 at 3 months on Prasad. The bill is
discounted by Sagar at 8 % p. a. with his bank. On maturity, Prasad finds himself unable to make
payment of the bill and requests Sagar to renew it. Sagar accepts the request and draws a new bill
at one month for ` 21,750 including interest which was duly accepted by Prasad. Sagar deposits
the bill into bank for the collection. Prasad honours the bill on the due date and Bank charges
` 250 as Bank Charges.
Pass necessary Journal Entries in the Books of Sagar and prepare Sagar’s account in the
books of Prasad.
11. Journalise the following transaction in the books of Abhishek :-
a) Siddhant informs Abhishek that Vineet’s acceptance for ` 23,000 endorsed to Siddhant
has been dishonoured. Nothing Charges amounted to ` 430.
b) Kajal renews her acceptance to Abhishek for ` 39,000 by paying 3,000 in cash and
accepting a fresh bill for the balance along with interest at 11.5 % p.a. for 3 months.
c)
Radhika retired her acceptance to Abhishek for ` 23,000 by paying ` 22,250 by cheque.
d) Abhishek sent a bill of Subodh for ` 9,000 to bank for collection. Bank informed that the
bill has been dishonoured by Subodh.
12. Journalise the following transactions in the books of Narendra: -
a) Narendra retires his acceptance to Upendra by paying ` 4,000 in cash and endorsing a bill
accepted by Ramlal for ` 5,000.
b) Vikram’s acceptance to Narendra ` 6,000 retired one month before the due date at rebate
of 12% p.a.
c)
Dilip renews his acceptance to Narendra for ` 12,000 by paying ` 4,000 in cash and
accepting a fresh bill for the balance plus interest at 12% p.a. for 3 months.
d) Bank informed Narendra that, Kartik’s acceptance for ` 13,000 to Narendra, discounted
with the bank was dishonoured and Noting Charges paid by bank ` 140.
13. Journalise the following transactions in the books of Bharti:-
a) Bank informed that Amit’s acceptance for ` 15,750 sent to bank for collection was
honoured and bank charges debited were ` 150.
b) Nitin renewed his acceptance for ` 22,200 by paying ` 2,200 in cash along with interest
on balance amount at 10% and accepted a fresh bill for the balance for 3 months.
c)
Dhanshri who had accepted Bharti’s bill for ` 17,500 was declared insolvent and only
40% of the amount due could be recovered from his estate.
d) Discharged our acceptance to Savita for ` 9,450 by endorsing Pravin’s acceptance to us
` 9,000.
14. Journalise the following transactions in the books of Sudha:-
a) Endorsed Sonali’s acceptance at 2 months for ` 6,000 in favour of Urmila and paid cash
` 3,500 in full settlement of her account ` 10,000.
b) Discounted 2 months acceptance of Surya for ` 7,800 with bank at 10% p.a.
c)
Bank informed that Anuradha’s acceptance of ` 4,800 which was discounted was
dishonoured and bank paid Noting Charges ` 125.
d) Pooja honoured her acceptance of ` 16,400 which was deposited into bank for collection.
15. Journalise the following transactions in the books of Mrunal :-
a) Bank informed that Aishwarya’s acceptance of ` 24,000 which was discounted had been
dishonoured and bank paid Noting Charges ` 220. Bill was renewed at the request of
Aishwarya for 2 months with interest of ` 480.
b) Received ` 4,630 from private estate of Ankur who was declared insolvent against bill
accepted by him for ` 6,000.
c) Accepted a bill of ` 15,000 at 3 months drawn by Anushka for the amount due to her
` 20,000 and balance paid by cheque.
d) Dishonoured our acceptance to Vivek ` 27,000 and Noting Charges paid by Vivek ` 700.
Accounting
treatment in the books of drawer and Drawee
|
Sr.
No. |
Transaction |
Drawer/ creditor |
Drawee/ Debtors |
|
1. |
Creditor sells
goods on credit |
Debtor’s
A/c Dr. To Sales A/c (Being goods
sold on credit) |
Purchases
A/c Dr. To Creditors (Being goods
purchases on credit) |
|
2. |
Creditor or
Drawer draws a bill & Acceptance received |
Bills
Receivable A/c Dr. To Drawee’s A/c (Being bill
drawn and acceptance received ) |
Drawer’s
A/c Dr. To Bills payable A/c (Being
acceptance given) |
|
3. |
Retained bill honoured
on the due date |
Cash/ Bank
A/c Dr. To Bills Receivable A/c (Being Retained
bill honoured on the due date) |
Bills Payable
A/c Dr. To Cash/ Bank A/c (Being Retained
bill honoured on the due date) |
|
4. |
Retained bill dishonoured
on the due date |
Drawee A/c Dr. To Bills Receivable A/c (Being Retained
bill dishonoured on the due date) |
Bills Payable
A/c Dr. To Drawer A/c (Being Retained
bill Dishonoured on the due date) |
|
5. |
Retained bill
dishonoured on the due date and Noting Charges paid by Drawer |
Drawee A/c Dr. To Bills Receivable A/c To Cash A/c (Being Retained
bill dishonoured on the due date & Noting Charges) |
Bills Payable
A/c Dr. Noting Changes
A/c Dr. To Drawer A/c (Being Retained
bill Dishonoured on the due date & Noting charges) |
a) Bill is honoured on the due date.
b) Bill is Dishonoured on the due date.
c) Bill is Dishonoured on the due date
& Noting charges Rs. 250 paid by Pratap.
Drawer :
Pratap
Drawee : Sujit
Due Date :
2months ( 1st August, 2019)
Amount :
82,000
In the books of Pratap (Drawer)
Journal
|
Date |
Particulars |
L/F |
Debit (RS) |
Credit (Rs) |
|
2019 |
|
|
|
|
|
June 1 |
Sujit’s
A/c Dr. To Sales A/c (Being goods
sold on credit) |
|
82,000 |
82,000 |
|
1 |
Bills
Receivable A/c Dr. To Sujit’s A/c (Being bill
drawn and acceptance received ) |
|
82,000 |
82,000 |
|
Aug1 a) |
Cash/ Bank
A/c Dr. To Bills Receivable A/c (Being Retained
bill honoured on the due date) |
|
82,000 |
82,000 |
|
b) |
Sujit’s
A/c Dr. To Bills Receivable A/c (Being Retained
bill dishonoured on the due date) |
|
82,000 |
82,000 |
|
c) |
Sujit’s
A/c Dr. To Bills Receivable A/c (Being Retained
bill dishonoured on the due date and Noting Charges) |
|
82,250 |
82,250 |
In the books of Sujit (Drawee)
Journal
|
Date |
Particulars |
L/F |
Debit (RS) |
Credit (Rs) |
|
2019 |
|
|
|
|
|
June 1 |
Purchases
A/c Dr. To Pratap’s A/c (Being goods
purchases on credit) |
|
82,000 |
82,000 |
|
1 |
Pratap’s
A/c Dr. To Bills payable A/c (Being
acceptance given) |
|
82,000 |
82,000 |
|
Aug1 a) |
Bills Payable
A/c Dr. To Cash/ Bank A/c (Being Retained
bill honoured on the due date) |
|
82,000 |
82,000 |
|
b) |
Bills Payable
A/c Dr. To Pratap’s A/c (Being Retained
bill honoured on the due date) |
|
82,000 |
82,000 |
|
C) |
Bills Payable
A/c Dr. To Pratap’s A/c (Being Retained
bill honoured on the due date) |
|
82,250 |
82,250 |
2) Bill
Discounted with Bank
|
Sr.
No. |
Transaction |
Drawer/ creditor |
Drawee/ Debtors |
|
1. |
Drawer discount
the bill with the bank |
Bank A/c Dr. Discount
A/c Dr. To Bills Receivable A/c (Being Drawee’s
acceptance discounted with the bank) |
No Entry |
|
2. |
Discounted bill
honoured on due date |
No Entry |
Bills Payable
A/c Dr. To Cash/ Bank A/c (Being our
acceptance honoured) |
|
3. |
Discounted bill
dishonoured on due date |
Drawee’s
A/c Dr. To Bank A/c (Being
Discounted bill dishonoured on due date) |
Bill Payable
A/c Dr. To Drawer’s A/c (Being
Discounted bill dishonoured on due date) |
|
4. |
Discounted bill
dishonoured and noting charges paid by bank |
Drawee’s
A/c Dr. To Bank A/c (Being
Discounted bill dishonoured on due date & Noting Charges) |
Bill Payable
A/c Dr. To Drawer’s A/c To Noting Charges A/c (Being
Discounted bill dishonoured on due date) |
C) Bill dishonour on due date and noting
charges Rs. 300 paid by bank.
Drawer: Ashwin
Drawee: Ajinkya
Due Date: 3 months ( 15 oct)
Discount Date:
Amount: 30,000
In the books of Ashwin (Drawer)
Journal
|
Date |
Particulars |
L/F |
Debit (RS) |
Credit (Rs) |
|
2019 |
|
|
|
|
|
July 12 |
Bank A/c Dr. Bill
Receiveable A/c Dr. To Ajinkya’s A/c (Being cheque
received and for balance bill drawn and acceptance received) |
|
15,000 30,000 |
45,000 |
|
July 12 |
Bank A/c Dr. Discount
A/c Dr. To Bills Receivable A/c (Being Ajinkya‘s
acceptance discounted with the bank) |
|
28,875 1,125 |
30,000 |
|
Oct 15 b) |
Ajinkya’s
A/c Dr. To Bank A/c (Being
Discounted bill dishonoured on due date) |
|
30,000 |
30,000 |
|
Oct 15 c) |
Ajinkya’s
A/c Dr. To Bank A/c (Being
Discounted bill dishonoured on due date & Noting Charges) |
|
30,000 |
30,000 |
WN: 1
Bill
Discounted = 30,000 x 15/100 x 3/12 = 300 x 15x ¼ = 75 x 15 = 1,125
In the books of Ajinkya (Drawee)
Journal
|
Date |
Particulars |
L/F |
Debit (RS) |
Credit (Rs) |
|
2019 |
|
|
|
|
|
July 12 |
Ashwin’s
A/c Dr. To Bank A/c To Bills Payable A/c (Being paid
cheque and for balance bill drawn and acceptance received) |
|
45,000 |
15,000 30,000 |
|
Oct 15 a) |
Bills Payable
A/c Dr. To Cash/ Bank A/c (Being our
acceptance honoured) |
|
30,000 |
30,000 |
|
Oct 15 b) |
Bill Payable
A/c Dr. To Ashwin’s A/c (Being
Discounted bill dishonoured on due date) |
|
30,000 |
30,000 |
|
Oct 15 c) |
Bill Payable
A/c Dr. To Ashwin’s A/c To Noting Charges A/c (Being
Discounted bill dishonoured on due date & Noting Charges) |
|
30,300 |
30,000 300 |
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