DK Goel Solutions Class 11 Accountancy Chapter 18 Bills of Exchange

Short Answer Questions

Question 1. 

Solution  1:

Definition of Bill of Exchange: As per Section 5 of the Negotiable Instruments Act, 1881, "A 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 bearer of the instrument."

Features or Characteristics of Bill of Exchange are:

1. Bill of exchange is a written order.
2. Bill of exchange is drawn and signed by the maker or drawer of the bill.
3. Bill of exchange is an unconditional order to a person or drawee, to pay the specified amount. The drawee must accept it to make it a valuable document.
4. The specified amount is payable to the person named in the bill or to his order or to the bearer.

Question 2. 

Solution 2:

Parties to a bills of exchange:-

1.) Drawer:- He is the seller or creditor entitled to receive money from someone. He writes or draws the bill and is known as drawer.

2.) Drawee or Acceptor:- He is the purchaser or the debtor on whom the bill is drawn and who is liable to pay the amount mentioned in the bill. He accepts to pay the amount by writing the word “Accepted” on the bill and then sign it.

3.) Payee:- The person to whom the payment is to be made is called payee The drawer himself or a third party may be the payee of the bill.

Question 3. 

Solution  3: Below are the advantages of bills of exchanges:-

1.) Helpful in the purchase and sale of goods on credit:- A bill of exchange serves as a written evidence of debt. It is a proof that the purchaser of goods owes the amount written in it. As such the goods can be sold on credit without difficulty.

2.) Legal Document:- It is a valid document in the eyes of law. If the drawee fails to make its payment, it would be easier to recover the amount legally in comparison to a verbal promise.

Question 4. 

Solution 4: A bill of exchange is called a draft till its acceptance is made.

Question 5. 

Solution  5:

Question 6. 

Solution  6: Sometimes, the purchaser of the goods or debtor himself writes a note, signs it and gives it to the seller of the goods. It is called a ‘Promissory Note’.

Features of a Promissory Note:-

1.) It must be in writing.

2.) The amount to be paid must be specified.

3.) It must be signed by the maker or promisor.

4.) The name of the payee must be mentioned in it.

Question 7. 

Solution 7:

Parties to a Promissory Note:-

1.) Maker:- He is the person who writes a promissory note and signs it.

2.) Payee:- He is the person who is entitled to get the payment.

Question 8. 

Solution 8:

Question 9. 

Solution 9:

Question 10.

Solution 10:

Question 11. 

Solution 11: Below are the uses of bills receivable:-

1.) He may keep it till the date of maturity.

2.) He may discount it will the banker before the date of maturity.

3.) He may endorse it to some other party before the date of maturity.

4.) He may send it to his banker for collection.

Question 12.

Solution 12: When the drawee makes the payment of bill before its due date, it is called retiring the bill. In such case the holder of the bill usually allows him discount, technically called rebate.

Question 13.

Solution 13:

(i) Endorsement of a bill:- Endorsement means signing the bill of exchange for the purpose of transferring it to another. The holder of a bill receivable can endorse the bill to another person by putting his signature at the back of the bill.

(ii) Renewal of a bill:- The acceptor of a bill finds himself unable to meet the bill on the due date. In such case he may request the holder of the bill to cancel the original bill and draw a new bill in place of the old one.

(iii) Dishonour of a bill:- When the acceptor of the bill refuses to pay the amount of the bill on the date of maturity or becomes insolvent, it is called dishonour of the bill.

(iv) Date of Maturity:- The date on which the payment of the bill becomes due is called the ‘due date’ or ‘date of maturity’. In other words the date on which the duration of the bill comes to an end is called the due date.

Question 14. 

Solution 14:

(i) Retiring of a bill of exchange:- When the drawee makes the payment of the bill before its due date, it is called retiring the bill. In such a case, the holder of the bill usually allows him discount, technically called ‘rebate’.

(ii) Discount of bill of exchange:- If the holder of a B/R needs money before the date of maturity, he can discount the bill from the bank in order to obtain cash for it. Discount means en-cashing the bill before the date of its maturity or borrowing from the bank on the security of the bill. 

(iii) Bill sent to bank for collection:- Sometime instead of Discount the bill, it is sent to the bank with the instructions to keep the bill till maturity and collect its amount from the acceptor on that date.

(iv) Noting Charge:- To establish the fact that the bill was properly presented and dishonoured, the bill is usually handed over to a person called ‘Noting Public’, appointed by the court.

Question 15. 

Solution 15:

Question 16. 

Solution 16:

(i) Bill is with the drawer himself:-

(iii) Bill is with the endorsee: Endorsement means transfer of Bill of Exchange or Promissory Note to another person. The person receiving the Bill of Exchange or Promissory Note becomes authorised to receive the payment. The person who transfers the Bill of Exchange or Promissory Note in favour of other person is called endorser. The person to whom the Bill of Exchange or Promissory Note is endorsed is called endorsee.

(iv) Bill sent to bank for collection:- Sometime instead of Discount the bill, it is sent to the bank with the instructions to keep the bill till maturity and collect its amount from the acceptor on that date.

Question 17. 

Solution 17: In order to oblige a friend, a bill may be accepted without consideration. Such a bill is known as “accommodation bill”.

Question 18.

Solution 18:

Class 11 Accounts Ch 18 Practical Problems Solutions

Question 1. 

Solution 1

Point of Knowledge:-

Bills Due Date = Date of Bill Drawn + Period + Grace Days

Question 2.

Solution 2            

Point of Knowledge:-

Due Date of Bill = Date of Bill Drawn + Period + Grace Days

When due date falls on;
1. Public holiday (here October 2, 2017 and August 15, 2017), then due date is preceding date.
2. Emergency holiday (here September 22, 2017), then due date is succeeding date.

Question 3. 

Solution 3:

Question 4.

Solution 4:

Working Note:-

Here the due date is February 04, 2017 which is a holiday then the due date is 05 February, 2017

Point of Knowledge:-

If due date falls on holiday, then due date is succeeding date.

Question 5. 

Solution 5:

Working Note:-

Here the due date is 11 March, 2017 which is a holiday then the due date is 10 March, 2017

Point of Knowledge:-

If due date falls on holiday, then due date is succeeding date. 

Question 6 (A)

Solution 6:

Question 6 (B)

Solution 6 (B):

Question 7. 

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Question 8. 

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Question 9. 

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Question 10.

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Question 11. 

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Question 12. 

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Question 13. 

Solution 13:

Question 14 (A) 

Solution 14 (A)

Question 14 (B)

Solution 14 (B)

Question 15. 

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Question 16.

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Question 17.

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Question 18. 

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Question 19.

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Question 20. 

Solution 20:

Question 21 (A).

Solution 21 (A)

Question 21 (B).

Solution 21 (B)

Question 22. 

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Question 23. 

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Question 24. 

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Question 25.

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Question 26. 

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Question 27. 

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Question 28. 

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Question 29.

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Question 30. 

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Question 31.

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Question 32.

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Question 33.

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Question 34. 

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Question 35. 

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Question 36. 

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Question 37. 

Solution 37:

Point of Knowledge:-

Here the due date is May 04, 2017 which is a holiday then the due date is 03 May, 2017. If due date falls on Public holiday, then due date is preceding date.

Question 38. 

Solution 38:

Question 39. 

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Question 40. 

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Question 41. 

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Q42. 

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Question 43. 

Solution 43:

Question 44 (A). 

Solution 44 (A)

Question 44 (B) 

Solution 44 (B):

Question 45 

Solution 45:

Question 46.

Solution 46: