SGR WAGH Bills of Exchange Full - 20210819 - 210205

CA FOUNDATION - ACCOUNTANCY
No Entry No Entry
Note : The duration of the bill should be counted from the date of
drawing, however in case of “Sight Bills” it should be from the date
of acceptance
(4) Entry for bill honoured on due date
Cash / Bank A/c Dr. xx Bills Payable A/c Dr. xx
To Bills Receivable A/c xx To Cash / Bank A/c xx
Note : The due date before days of grace is called nominal due date
and the due date after counting the days of grace is called legal due
date. If the legal due date falls on public holiday (including Sunday)
then previous day is taken as due date. But if a sudden holiday is
de-clared then next day should be taken as due date.
(5) Entry for bill dishonoured on due date
Drawee A/c Dr. xx Bills Payable A/c Dr. xx
To Bills Receivable A/c xx To Drawer A/c xx
(6) Entry for noting charges
Drawee A/c Dr. xx Noting charges A/c Dr. xx
To Cash A /c xx To Drawer A/c xx
(They are paid by drawer initially and then recovered from drawee)
(7) Entry for charging / providing interest
Drawee A/c Dr. xx Interest A/c Dr. xx
To Interest A/c xx To Drawer A/c xx
(8) Entry for cash + New bill
Cash / Bank A/c Dr. xx Drawer A/c Dr. xx
Bills Receivable A/c Dr. xx To Cash / Bank A/c xx
To Drawee A/c xx To Bills Payable A/c xx
(9) Entry for retirement of bill
Cash / Bank A/c Dr. xx Bills Payable A/c Dr. xx
Rebate A/c Dr. xx To Cash / Bank A/c xx
To Bill Receivable A/c xx To Rebate A/c xx
Note: When the bill is honoured before the due date, it is said to be
retired.
(10) When the drawee is declared insolvent
(a) Entry for dishonoured of bill
To Bill Receivable A/c xx To Drawer A/c xx
(b) Entry for recovery
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Bank A/c Dr. xx Drawer A/c Dr. xx

Bad Debts A/c Dr. xx To Bank A/c xx
To Drawee A/c xx To Deficiency A/c xx
(11) Entries when the bill is discounted with the bank
(a) Entry for discounting the bill
Bank A/c Dr. xx No Entry
Discount A/c Dr. xx
To Bill Receivable A/c xx
(b) Entry when such bill is honoured
No Entry Bills Payable A/c Dr. xx
To Cash / Bank A/c xx
(c) Entry when such bill to dishonoured
To Bank A/c xx Noting Charges A/c Dr. xx
(Bill Amount + noting charges) To Drawer A/c xx
(12) Entries when the bill is endorsed
(a) Entry for endorsement of bill
Endorsee A/c Dr. xx No Entry
No Entry Bills Payable A/c Dr. xx
To Cash / Bank A/c xx
(c) Entry when such bill is dishonoured
To Endorsee A/c xx Noting Charges A/c Dr. xx
(Bill amount + Noting Charges) To Drawer A/c xx
(13) Entries when bill is sent to bank for collection
Entry for sending the bill
(a) Bills for collection A/c Dr. xx No Entry
Bank A/c Dr. xx Bills Payable A/c Dr. xx
Bank Comm. A/c Dr. xx To Cash / Bank A/c xx
To Bills for collection A/c xx
(c) Entry when such bill dishonoured
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To Bills for collection A/c xx Noting Charges A/c Dr. xx

To Cash A/c xx To Drawer A/c xx
 IMPORTANT POINTS TO REMEMBER
A. Term of bill
1. When bill is drawn after date, term of bill begins from date of bill.
2. When bill is drawn after sight, term of bill begins (or counted) from date of
acceptance.
3. When bill is drawn at sight, at presentment or when no term is mentioned on
bill, then bill is payable whenever payment is demanded (no days of grace
allowed in this case)
B. Foreign bill of exchange

1. It is bill drawn for foreign trade operations.
2. Following are examples
Bill drawn On person resident in Bill payable

Case I In India Outside India Outside India
Case II Outside India Outside India -
Case III Outside India - In India
Case IV Outside India Outside India
C. Promissory notes
1. It is instrument in writing, containing unconditional promise signed by maker
to pay certain sum of money to order of certain person
2. Features -
a. Must be in writing
b. It should contain unconditional promise
c. Not to be payable to bearer
d. It should be stamped
e. There are two parties (Maker & Payee) to promissory note
f. Acceptance not required
g. Promissory note is made by debtor / buyer
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3. Indian currency is promissory note
D. Noting Charges
It is necessary that the fact of dishonour and the causes of dishonour should be
established. If the acceptor can prove that the bill was not properly presented to
him for payment, he may escape liability. Therefore, if there is dishonour, or fear of
dishonour, the bill will be given to a public official known as “Notary Public”. These
officials present the bill for payment and if the money is received, they will hand
over the money to the original party. But if the bill is dishonoured they will note
the fact of dishonour, with the reasons and give the bill back to their client. For this
service they charge a small fee. This fee is known as noting charges. The amount of
noting charges is recoverable from the party which is responsible for dishonour.
E. RENEWAL OF BILL (Giving more time for honouring the bill)

Sometimes the acceptor is unable to pay the amount and he himself moves that
he should be given extension of time and in consideration agrees to bear interest
for the extended time period (calculated from the date of renewal till the date of
expected settlement). In such a case a new bill will be drawn and the old bill will
be cancelled.
F. RETIREMENT OF BILLS OF EXCHANGE & REBATE

Many a time acceptor has spare funds much before the maturity date of the bill of
exchange accepted by him. In such circumstances he approaches the payee of the
bill of exchange and asks him whether the payee is prepared to accept cash before
the maturity date. In such cases the acceptor gets a certain rebate or interest or
discount for premature payment. The rebate becomes the income of the acceptor
and expense of the payee. It is a consideration of premature payment.
G. Distinguish between Bills of exchange & Promissory Notes
Particulars Bills of exchange Promissory Notes

1 Nature of Investment It is an order to pay It is promise to pay
2 Drawn By It is drawn by creditor It is drawn by debtor
3 Number of parties Three Two
4 Name of parties Drawer Maker / Promisor
Drawee Payee / Promisee
Payee
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5 Acceptance Required Non required

6 Can be drawn payable Yes No
to maker him self
7 can be drawn without Yes No
consideration (Accommodation Bill)
Particulars Trade Bill Accommodation Bill

1 Purpose It is drawn and It is drawn and
accepted for some accepted without
consideration i.e. for any consideration
trade purpose.
2 Need It is drawn to settle a It is a drawn to
business transaction. meet the financial
requirements of the
drawer / drawee /
both temporarily.
3 Legal Status The drawer can take The drawer cannot
legal action if the bill take any legal action
is dishonoured. when the bill is
dishonoured.
4 Discounting Charges Discounting charges Discounting charges
are borne by the are divided between
drawer the drawer and
drawee in the ratio
of the proceeds.
H. Other points
1. Bill discounted is contingent liability in books of drawer and shown as foot
note to balance sheet.
2. When bill is retained by drawer, drawer and payee are same persons.
3. When bill is dishonoured, noting charges are paid by holder of bill but ultimately
borne by drawee of bill. i.e. noting charges A/c is debited in books of drawee.
4. Discount charges are calculated from date of discounting to due date of bill
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and if date of discounting not given then calculate from date of bill.
5. Rebate on retirement is calculated from date of payment (honour) to due date

of bill.
6. Accommodation bill are drawn to raise finance and for mutual help.
7. No consideration is necessary in case of accommodation bill.
8. When transaction of bill receivable & payable are large it is better to maintain
bills receivable & bills payable book. Both these books are subsidiary books.
9. Individual entries posting is done from bills receivable book to Credit side of
debtors account & total of bills receivable book is posted to debit side of bills
receivable account.
10. Individual entries posting is done from bills payable book to debit side of
creditors account & total of bills payable book is posted to credit side of bills
payable account.
11. Bills of exchange is drawn by creditor on debtor (it is accepted by debtor).
12. Bills of exchange is also known as trade bill.
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E. Format of Bills of Exchange
Illustration 1: (General Acceptance)

Partner Akshay of Mother food products, Charni road, Mumbai 42 - draws a bill of
exchange for ` 15,000/- for 2 months after date on 21st july 2011 on Sheetal Bali,
Mahjana peth, Pune 52. The bill was accepted on 24th july, 2011. Prepare a bill of
exchange.
Solution:
Bill of exchange
Stamp Mother food Product
Charny Road, Mumbai – 042.
` 15,000/- Date: 21st july, 2011
Two months after date pay to me or my order the sum of Rupees Fifteen thousand
only for the value received.
Sd/-
(Akshay)
Partner of Mother Food Products.
To, Accepted
Sheetal Bali, Sd/-
Mahjana Peth, Pune – 52 (Sheetal Bali)
Date: 24th july, 2011
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Illustration 2 : (Qualified acceptance)

Aditi Swapnil Gade, A- 16 Venkatesh Heritage, Pune 411 052, drew a bill on 15th
November, 2010 of ` 25,000 after sight for 90 days on Sunita Vikaschandra Gade,
62 Bhoitenagar, jalgaon. Payable to Sushma Arun Khare, 25 Anup Trade Centre,
Chalisgaon. The bill was accepted for ` 22,500/- only on 18th November 2010.
Prepare a bill of Exchange.
Solution :
Bill of exchange
Stamp Aditi Swapnil Gade.

A-16 Venkatesh Heritage,.
` 15,000/- Pune – 411 052.
Date: 15th November, 2010.
Ninety days after sight pay to Sushma Arun khare, 25, Anup Trade Centre, Chalisgaon
or her order the sum of Rupees Twenty five Thousand only for the value received.
Sd/-
Aditi Gade
Accepted for ` 22,500 only
To, Accepted
Sunita Vikaschandra Gade, Sd/-
62, Bhoitenagar, Jalgaon (Sunita Vikaschandra Gade)
Date: 18th November, 2010
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` 50.
Show Journal of X, Y and Z.
Q.5 Journalise the following transactions in K. Katrak’s books.

a) Katrak’s acceptance to Basu for ` 2,500 discharged by a cash payment of
`1,000 and a new bill for the balance plus ` 50 for interest.
b) G. Gupta’s acceptance for ` 4,000 which was endorsed by Katrak to M. Mehta

was dishonoured. Mehta paid ` 20 noting charges. Bill withdrawn against
cheque.
c) D. Dalal retires a bill for ` 2,000 drawn on him by Katrak for ` 10 discount.
d) Katrak’s acceptance to Patel for ` 5,000 discharged by Mody’s acceptance to

Katrak for a similar amount.
Q.6 Journalize the following in the books of Don:

a) Bob informs Don that Ray’s acceptance for ` 3,000 has been dishonoured and
noting charges are ` 40. Bob accepts ` 1,000 cash and the balance as bill at
three months at interest of 10% p.a. Don accepts from Ray his acceptance at
two months plus interest @ 12% p.a.
b) James owes Don ` 3,200; he sends Don’s own acceptance in favour of Ralph for
` 3,160; in full settlement.
c) Don meets his acceptance in favour of Singh for ` 4,500 by endorsing John’s
acceptance for ` 4,450 in full settlement.
d) Ray’s acceptance in favour of Don retired one month before due date, interest
is taken at the rate of 6% p.a.
Q.7 A drew a bill on B for ` 20,000 for 3 months for mutual accomodation on 1.1.2011.
This bill was discounted on 4.1.2011 @ 12% p.a. and the proceeds were shared in
the ratio 3 : 1. On due date both the parties honoured their commitments. Show
Journal of A and B.
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Q.8 For the accommodation of Sharma, Varma accepted a bill of ` 2,000 for 3 months,
drawn on him by Sharma on 5th January,1996. Sharma discounted the bill with
his bank for ` 1,950. Before the due date Sharma could not remit the amount to
Varma. On the due date Varma honoured the bill and immediately drew a bill for
` 2,040 (` 40 being interest) on Sharma for 1 month. Sharma accepted the bill and
returned it to Varma. On the due date Sharma honoured the bill. Give the Journal
Entries in the Books of Sharma and Varma.
Q.9 Pramod and Kishore were in need of funds. Therefore, on 1st June, 1998 Pramod
accepted a bill for ` 10,000 drawn by Kishore for 3 months. Kishore got the bill
discounted at 8% p.a. and remitted half of the proceeds to Pramod. Before the
due date, Kishore found himself not in a position to send the remaining half of
the amount to Pramod and hence on August 29,1998; he agreed to accept a bill
for ` 5,040/-(inclusive of interest) drawn by Pramod, for 3 month which Pramod
discounted for ` 5000/-. On the due date Kishore honored this bill. Give journal
entries in the books of Pramod and Kishore.
Q.10 Lata draws a bill for ` 40,000/- and Pallavi accepts the same for the mutual
accommodation of both of them to the extent of 3/4 and 1/4 respectively. Lata
discounts the bill for ` 39,800/- and remits 1/4 of the proceeds to Pallavi. Before
the due date, Pallavi draws another bill for ` 50,000 on Lata in order to provide
funds to meet the first bill. The second bill is discounted for ` 49,000/- with the
help of which the first bill is met and a sum of ` 9200/- is remitted to Lata. Before
the due date of the second bill, Lata becomes insolvent and Pallavi received a
dividend of 60 paise in a rupee in full satisfaction.
Show journal entries in the books of Lata & Pallavi.
Q.11 On 1st July, 1999 G drew a bill for ` 80,000 for 3 months on H for mutual
accommodation accepted the bill of exchange.
G has purchased goods worth ` 81,000 from J on the same date. G endorsed H’s
acceptance to J in full settlement.
On 1st September, 1999 J purchased goods worth ` 90,000 from H. J endorsed the
bill of exchange received from G to H and paid ` 9,000 in full settlement of the
amount due to H. On 1st October, 1999 H purchased goods worth ` 1,00,000 from
G. He paid the amount due to G by cheque.
Give necessary Journal entries in the books of H.
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Q.12 On 1/1/2019 Ram drew & Shyam accepted a bill at 3 months for ` 4,000. On
4/1/2019 Ram discounted the bill @ 15% p.a. & remitted ½ proceeds to Shyam. On
1.2.2019 Shyam drew & Ram accepted a bill at 4 months for ` 3,000. On 4/2/2019
Shyam discounted the bill @ 15% p.a. & remitted ½ proceeds to Ram. At maturity
Ram met his acceptance but Shyam dishonoured bill for which Shyam accepted a
new bill at 3 months for original bill + Interest @ 18% p.a. On 1/7/2019 Shyam
became insolvent & only 50 paise in a rupee were received from him. Pass Journal
entries in the books of Ram.
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only 50% was realised from his estate on 15th October, 2019.
Pass necessary Journal entries for the above transactions in the books of Anil.
Q.5 On 1/1/2016 Nisha draws a bill for `5,000 on Disha for 3 months for mutual
accommodation. On same day, Disha draws a bill for ` 6,000 on Nisha for 4 months.
Both bills were discounted by bank for ` 4,850 & ` 5,700 respectively. 50% of receipt
sent to other party. 1st bill was met on due date. On due date of 2nd bill Nisha
received balance money due from Disha & Nisha honoured the bill accepted by her.
Prepare Journal entries in the books of Nisha.
Q.6 A draws upon B three Bills of Exchange of ` 3,000, ` 2,000 and ` 1,000 respectively.
A week later his first bill was mutually cancelled, B agreeing to pay 50% of the
amount in cash immediately and for the balance plus interest `100, he accepted
a fresh Bill drawn by A. This new bill was endorsed to C who discounted the same
with his bankers for ` 1,500. The second bill was discounted by A at 5% p.a. This bill
on maturity was returned dishonoured (noting charge being ` 30). The third bill was
retained till maturity when it was duly met.
Give the necessary journal entries recording the above transactions in the
books of A.
Q.7 X Owed to y ` 6,000 on 1st January, 2020. On the Same Date Y Drew upon X a bill
for the Amount of 2 months And X returned the bill duly Accepted. Y got the bill
Discounted at his Bank 5% p.a. Before the bill was Due For payment, X told Y that he
was not able to pay the full amount and requested Y to accept ` 2,000 immediately
and drew upon him Another bill for the remaining amount for two month together
with interest at 6%p.a.,Y agree. The second bill was duly met.
Gives the journal Entries in the books of both X and Y.
Q.8 Pankaj draws a bill on Anil worth ` 8.000/- for three months which was accepted by
Anil. On the same date Pankaj discounted the bill with his bank @10% per annum.
On the due date Anil Dishonoured his acceptance; Anil Paid up ` 4,000/- to Pankaj
and accepted a fresh bill for two month for the balance including interest of ` 40/.
Anil become insolvent before the maturity of the bill and 50 paise in a rupee is
received as first and final dividend from his estate.
Pass necessary journal entries in the books of Pankaj and Anil.
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Ans. False – A crossed cheque cannot be negotiable (transferable) but payable only
to person named in it. But bearer cheque, Bills of Exchange, Promissory note
are negotiable.
11. Bills of exchange can be oral.

Ans. False – Bills of exchange is a written unconditional order by drawer to drawee
to pay certain sum of money.
12. A foreign bill is a bill drawn on person resident in India & made payable in
India.
Ans. False - A foreign bill is a bill drawn on person resident outside India or made
payable outside India or drawn outside India.
13. Noting charges are paid by drawee.

Ans. False – Noting charges are paid by holder of bill (person who holds bill at time
of dishonour) but ultimately borne by drawee of bill.
14. In case of Bills of exchange, the drawer and the payee may not be the same
person but in case of a promissory note, the maker and the payee may be the
same person.
Ans. False – In case of Bills of Exchange, the drawer and the payee will be same
person if the drawer retains the bill with himself. In case of promissory note
the maker is the promisor who promises to pay the money therefore the maker
cannot be the payee.
15. Accommodation Bills are drawn, accepted and endorsed for some consideration.
Ans. False – Accommodation bills are drawn, accepted and endorsed without any
consideration as accommodation bills are drawn to raise finance for mutual
help.
16. A bill given to a creditor is called Bills Receivable.

Ans. False – On giving a bill, the debtor has committed for a payment; therefore, a
bill given to creditors is called Bills payable.
Q2. Fill in the blanks:

1. Liability for bill discounted is a ___________ liability.
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2. In case of bill at sight, days of grace are ________.
3. A bill of exchange matures on 16th July. Suddenly a bank strike declared on

this date. Next day is Sunday. Bill will mature on __________.
4. A bill drawn & accepted for mutual help is known as _____________ bill.
5. Bills of Exchange before acceptance is called __________.
6. Indian currency is ____________.
7. Bills discounted is shown as ____________ in balance sheet.
8. Entries of bills receivable book is individually posted to __________account

on _________ side & total posted to ______ side of ___________ account.
9. There are___ parties to bills of exchange whereas ___ parties in promissory

note.
10. A Bills of Exchange drawn in any regional language of India is called _________.
11. Bills of exchange of ` 20,000 drawn on 1/1/2019 with term of 3 months was
discounted on 4/3/2019 @ 18% p.a. discount.
∴ Discount charges are _______.
12. Mr. A accepted a 90 days bill of ` 10,000 drawn on B 5/2/2019. On 13/3/2019

A wished to retire the bill. Mr. B offered a rebate @ 12% p.a. ∴ Rebate = _____.
13. Endorsement, discounted & collection of Bills of Exchange is made by ________.
14. Fees paid in cash to Notary public is charged by ____________.
15. On 1/6/2018 Bill Receivable of C Ltd. Showed a balance of ` 80,000. During

month of June 18 new bill accepted by debtors was ` 12,000 bill dishonoured
by drawee ` 6,000 & bill honoured by drawee ` 29,000. So balance of bill
receivable as on 30/6/2018 is_________.
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16. If a bill is drawn on 29/6 for 3 months it will mature on _________.
17. The person to whom bill is addressed is _____________.
18. If a bill is drawn on 28/1/16 for 1 month it will mature on __________.
19. A bill from point of view of creditor is called ____________.
20. ____________is not essential requirement of valid bills of exchange.
21. _________would debit noting charges account in his books.
22. In a firm usually receives large number of promissory notes, it would be

convenient to record transaction in separate book called ______________.
23. A drew on accommodation bill on B for 3 months. Proceeds were to be shared

equally. A got the bill discounted at 12% p.a. & remitted ` 48,500 to B. Bill
amount was__________.
24. A has discounted a 3 months bill @ 10% p.a. from bank & given credit of
` 11,700. On due date bill are dishonoured & noting charges of `20 paid by
bank. Bank will debit A’s account by __________.
25. While preparing bank Reconciliation Statement, Mr. A found that bill of
exchange of ` 5,000 discounted with bank was dishonoured & bank paid ` 100
noting charges. Entry in books of A will be:
26. X draws mutual accommodation bill on Y to be shared between Y & X in 3:1.

Bill amount ` 6,000 & Discount ` 120. Y’s share of discount is_______.
Q.3 Multiple Choice Questions:

1. On 1.1.2017, A draws a bill on B for `1,20,000 for 3 months’ maturity date of
the bill will be:
(a) 1.4.2017 (b) 3.4.2017 (c) 4.4.2017
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2. On 16.6.2016 P draws a bill on Q for `1,25,000 for 30 days. 19th July is a

public holiday, maturity date of the bill will be:
(a) 19th July (b) 18th July (c) 17th July
3. PQ draws a bill on XY for `130,000 on 1.1.2017. X accepts the same on 4.1.2017

for period of 3 months after date. What will be the maturity date of the bill:
(a) 4.4.2017 (b) 3.4.2017 (c) 7.4.2017
4. A draws a bill on B. A endorsed the bill to C. The payee of the bill will be
(a) A (b) B (c) C
5. A bill of `120,000 was discounted by Saras with the banker for `1,18,800.
At maturity, the bill returned dishonoured, noting charges ` 200. How much
amount will the bank deduct from Saras’s bank balance at the time of such
dishonour?
(a) `1,20,000 (b) `1,18,800 (c) `1,20,200
6. X draws a bill on Y for `300,000 on 1.1.2016 for 3 months after sight, date of
acceptance is 6.1.2016.
Maturity date of the bill will be:
(a) 8.4.2016 (b) 9.4.2016 (c) 10.4.2016
7. X sold goods to Y for ` 5,00,000. Y paid cash `4,30,000. X will grant 2% discount
on balance, and Y request X to draw a bill for balance, the amount of bill will
be:
(a) ` 98,000 (b) ` 68,000 (c) ` 68,600
8. On 1.1.2017, X draws a bill on Y for ` 5,00,000 for 3 months. X got the bill
discounted 4.1.2017 at 12% rate. The amount of discount on bill will be:
(a) ` 15,000 (b) ` 16,000 (c) ` 18,000
9. Mr. Jay draws a bill on Mr. John for ` 3,00,000 on 1.1.2017 for 3 months. On
4.2.2017, John got the bill discounted at 12% rate. The amount of discount
will be:
(a) ` 9,000 (b) ` 6,000 (c) ` 3,000
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10. XZ draws a bill on YZ for ` 2,00,000 for 3 months on 1.1.2017. The bill is
discounted with banker at a charge of `1,000. At maturity the bill return
dishonoured. In the books of XZ, for dishonour, the bank account will be credited
by:
(a) `199,000 (b) ` 200,000 (c) ` 201,000
11. On 1.1.2017, XA draws a bill on YB for ` 1,00,000. At maturity YB request XA to

renew the bill for 2 month at 12% p.a. interest. Amount of interest will be:
(a) ` 2,000 (b) ` 1,500 (c) ` 1,800
12. A bill of exchange is drawn by a

(a) Creditor (b) Debtor (c) Debenture holder
13. At the time of drawing a bill, the drawer credits

(a) Bills Receivables A/c (b) Bills Payable A/c
(c) Debtor’s A/c
14. A promissory note is made by a

(a) Seller (b) Purchaser (c) Endorsee
15. A bill of exchange contains

(a) An unconditional order (b) A promise
(c) A request to deliver the goods
16. A promissory note contains

(a) An unconditional order (b) A promise
(c) A request to deliver the goods
17. The rebate on the bill shows that

(a) It has been endorsed
(b) It has been paid after the date of maturity
(c) It has been paid before the date of maturity
18. Notary Public may charge his fee from the

(a) Holder of bill of exchange (b) Drawer
(c) None
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Answer
Fill in the blanks

1. contingent
2. NIL
3. 18th July
4. accommodation
5. Draft
6. Promissory note
7. Foot note (Contingent liability)
8. Drawee’s, Credit, Debit, Bills receivable
9. 3, 2
10. Hundi
11. ` 300
12. 187
13. Drawer / Creditor
14. Holder of bills of exchange
15. ` 57,000
16. 1st October
17. Debtor (Drawee)
18. 2/3/16
19. Bills Receivable
20. Consideration
21. Drawee
22. Bills receivable book
23. ` 1,00,000
24. ` 12,020
25. Drawee A/c Dr. 5,100
To Bank 5,100
26. ` 90
Multiple Choice Questions:
1. (c) 6. (b) 11. (a) 16. (b)
2. (b) 7. (c) 12. (a) 17. (c)
3. (a) 8. (a) 13. (c) 18. (a)
4. (c) 9. (b) 14. (b)
5. (c) 10. (b) 15. (a)
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2. X sold goods to Y for ` 5,00,000. Y paid cash ` 4,30,000. X will grant 2%

discount on balance, and Y request X to draw a bill for balance, the amount of
bill will be:
(a) ` 98,000 (b) ` 68,000 (c) ` 68,600
3. Mr. Jay draws a bill on Mr. John for ` 3,00,000 on 1.1.2017 for 3 months. On
4.2.2017, John got the bill discounted at 12% rate. The amount of discount
will be:
(a)
` 9,000 (b) ` 6,000 (c) ` 3,000
4. At the time of drawing a bill, the drawer credits

(a) Bills Receivable A/c (b) Bills Payable A/c
(c) Debtor’s A/c
5. A promissory note is made by a

(a) Seller (b) Purchaser (c) Endorsee
Q.4 Vijay sold goods to Pritam on 1/4/16 for `1,06,000. Pritam accepted bill for 3
months. Pass necessary Journal entries in the books of Vijay in the following cases:-
1) If bill is held to maturity and honoured.
2) If bill is discounted with bank on 4/4/16. Discount charges `2,000 Bill is

honoured by Pritam on due date.
3) If bill is endorsed to chaman on 4/4/16. On the due date the bill is dishonoured
by Pritam `500 Noting Charges paid by Chaman.
4) If bill is sent to bank for collection. On the due date the bill is honoured and
bank charged `1,500 as commission.
5) If bill is retired on 1/6/16 and Rebate of ` 1,000 is given.
6) If bill is Renewed on 1/7/16. Pritam accepts new bill of ` 1,06,000 together

with interest @ 10% p.a. for 2 months. On the due date, the renewed bill is
dishonoured and Pritam is declared insolvent. Only 25 paise in a rupee can be
recovered from his estate on 1/8/16. (15)
25
Q.5 For mutual accomodation of Aman and Chaman on 1/4/19, Aman drew a bill on
Chaman for `10,000 for 4 months. Chaman accepted the bill. Aman discounts the
bill with bank @ 12% p.a. and remits 50% of the proceeds to chaman.
Pass necessary journal entries in the Books of Chaman in the following cases :-
1) If Aman sends ` 5,000 before maturity and bill is honoured by chaman.
2) If Aman sends ` 5,000 before maturity but bill is dishonoured by chaman.

Chaman agrees to accept new bill of ` 10,000 for 3 months @ 15% p.a. New
bill is honoured.
3) If Aman does not send money but chaman honours the bill. Aman agrees to
accept new bill of ` 5,000 for 1 month @ 10% p.a. new bill is dishonoured by
Aman and only 75% can be recorved from estate.
4) If on 1/5/19 chaman drew a bill of `15,000 on Aman. Chaman discounts the

bill with bank @ 10% p.a. for 3 months.On the due date chaman sends the net
amount and both bills are honoured (15)
26
Q.2
In the books of Rajendra.
Date Particulars L. F. Debit (`) Credit (`)

1 / 6 /2019 Shubham A/c Dr. 45,000
To BP A/c 45,000
(Being bill accepted)
1 / 6 /2019 Bank A/c Dr. 14,700
Discount A/c Dr. 300
To Shubham A/c 15,000
(Being amt received from Shubham)
4 / 9 /2019 BR A/c Dr. 63,000
(Being new bill accepted by Shubham)
4 / 9 /2019 Bank A/c Dr. 61,650
Discount A/c Dr. 1,350
To BR A/c 63,000
(Being bill discounted)
4 / 9 /2019 BP A/c Dr. 45,000
To Bank A/c 45,000
(Being bill honoured)
4 / 9 /2019 Shubham A/c Dr. 12,000
To Bank A/c 11,100
To Discount A/c 900
(Being amt remitted to Shubham of new bill)
7/ 12 /2019 Shubham A/c Dr. 63,000
To Bank A/c 63,000
(Being bill dishonoured due to insolvency)
7/ 12 /2019 Bank A/c Dr. 16,800
Bad debts A/c Dr. 25,200
(Being Shubham’s insolvency &
40% recovered)
28
In the books of SHUBHAM

1 / 6 /2019 BR A/c Dr. 45,000
To Rajendra A/c 45,000
1 / 6 /2019 Bank A/c Dr. 44,100
To BR A/c 45,000
1 / 6 /2019 Rajendra A/c Dr. 15,000
To Bank A/c 14,700
To Discount A/c 300
(Being 1/3rd of proceeds remitted)
4 / 9 /2019 Rajendra A/c Dr. 63,000
To BP A/c 63,000
(Being new bill accepted by Shubham)
4 / 9 /2019 Bank A/c Dr. 11,100
(Being amt remitted from Rajendra)
7 /12/2019 BP A/c Dr. 63,000
(Being bill dishonoured)
7 /12/2019 Rajendra A/c Dr. 42,000
To Bank A/c 16,800
To Deficiency A/c 25,200
(Being amt paid to the extent of 40%
and declared insolvency)
29
Q.3
In the books of X.

1 / 4 /2019 BR A/c Dr. 4,000
To Y A/c 4,000
(Being bill accepted by Y)
1 / 4 /2019 Bank A/c Dr. 3,920
Discount A/c Dr. 80
To BR A/c 4,000
1 / 4 /2019 Y A/c Dr. 2,000
To Bank A/c 1,960
To Discount A/c 40
(Being half of the proceeds sent.)
4 / 8 /2019 Y A/c Dr. 7,000
To BP A/c 7,000
(Being new bill accepted by X)
4 / 8 /2019 Bank A/c Dr. 1,300
Discount A/c (Refer WN) Dr. 200
To Y A/c 1,500
(Being amt received from Y)
? BP A/c Dr. 7,000
To Y A/c 7,000
? Y A/c Dr. 3,500
To Bank A/c 875
(Being X’s insolvency % 25% of amt
due paid off)
30
Working Note:
31
Q.4
In the books of Anil.

5 / 4 /2019 BR A/c Dr. 9,000
To Sanjay A/c 9,000
(Being Sanjay accepted bill)
5 / 4 /2019 Bank A/c Dr. 8,820
To BR A/c 9,000
5 / 4 /2019 Sanjay A/c Dr. 3,000
To Bank A/c 2,940
To Discount A/c 60
(Being 1/3 proceeds of the bill
transfer)
8 / 7 /2019 Sanjay A/c Dr. 12,600
To BP A/c 12,600
(Being acceptance of bill given)
8 / 7 /2019 Bank A/c Dr. 2,220
[(6,000 + 2,220) / 12,330* 270]
To Sanjay A/c 2,400
(Being amt. received from Sanjay
against 2nd bills.)
? BP A/c Dr. 12,600
To Sanjay A/c 12,600
(Being bill dishonoured due
to insolvency)
15/10/2019 Sanjay A/c Dr. 8,400
To Bank A/c 4,200
(Being 50% paid to Sanjay)
32
Q.5
In the books of Nisha.

1 / 1 /2016 BR A/c Dr. 5,000
To Disha A/c 5,000
(Being bill drawn)
1 / 1 /2016 Bank A/c Dr. 4,850
To BR A/c 5,000
1 / 1 /2016 Disha A/c Dr. 2,500
To Bank A/c 2,425
To Discount A/c 75
(Being amt remitted to Disha)
1 / 1 /2016 Disha A/c Dr. 6,000
To BP A/c 6,000
(Being new bill drawn by Disha)
1 / 1 /2016 Bank A/c Dr. 2,850
Discount A/c Dr 150
To Disha A/c 3,000
(Being amt. received from Disha on
accommodation)
4 / 5 /2016 Bank A/c Dr. 500
To Disha A/c 500
(Being balance received from Disha)
[Nisha gives 2500 to Disha]
[Disha gives 3000 to Nisha]
Net Rs. 500 received from Disha]
4 / 5 /2016 BP A/c Dr. 6,000
To Bank A/c 6,000
33
Q.6
In the books of A

? BR (I) A/c Dr. 3,000
BR (II) A/c Dr. 2,000
BR (III) A/c Dr. 1,000
To B A/c 6,000
(Being bill accepted by B)
? B A/c Dr. 3,000
To BR (I) A/c 3,000
(Being bill received from B for
renewal)
? Cash A/c Dr. 1,500
BR (IV) A/c Dr. 1,600
To B A/c 3,000
To Interest A/c 100
(Being amt received on cancellation
of the 1st bill, 50% along with a new
bill for 50% of the amt. plus interest
Rs. 100)
? C A/c Dr. 1,600
To BR (IV) A/c 1,600
(Being A’s acceptance endorsed in
favoring A/c)
? Bank A/c Dr. 1,900
Discount A/c Dr 100
To BR A/c (II) 2,000
? B A/c Dr. 2,030
To Bank A/c 2,030
(Being BR II dishonoured &
noting charges of Rs. 30)
To BR (III) A/c 1,000
(Being bill matured)
34
Q.7 In the books of Y

1 / 1 /2020 BR A/c Dr. 6,000
To X A/c 6,000
(Being bill accepted by X)
1 / 1 /2020 Bank A/c Dr. 5,950
Discount A/c Dr. 50
To BR A/c 6,000
? X A/c Dr. 6,000
To Bank A/c 6,000
? X A/c Dr. 40
To Interest A/c 40
(Being Interest receivable)
BR A/c Dr. 4,040
To X A/c 6,040
(Being new bill accepted)
To BR A/c 4,040
35
In the books of X

1 / 1 /2020 Y A/c Dr. 6,000
To BP A/c 6,000
? BP A/c Dr. 6,000
To X A/c 6,000
? Interest A/c Dr. 40
To Y A/c 40
(Being Interest payable to Y)
? Y A/c Dr. 6,040
To BP A/c 4,040
To Bank A/c 2,000
(Being bill drawn & part payment
made)
? BP A/c Dr. 4,040
To Bank A/c 4,040
(Being new bill honoured)
36
Q.8
In the books of Pankaj

? BR A/c Dr. 8,000
To Anil A/c 8,000
(Being bill receivable from Anil)
To BR A/c 8,000
? Anil A/c Dr. 8,000
To Bank A/c 8,000
? Cash A/c Dr. 4,000

To Anil A/c 4,000
(Being part payment made)
? Anil A/c Dr. 40
To interest A/c 40
(Being interest receivable)
? BR A/c Dr. 4,040
To Anil A/c 4,040
(Being new bill accepted by Anil)
? Anil A/c Dr. 4,040
To BR A/c 4,040
To Anil A/c 4,040
(Being Anil insolvent)
37
In the books of Anil

? Pankaj A/c Dr. 8,000
To BP A/c 8,000
? BP A/c Dr. 8,000
To Pankaj A/c 8,000
To cash A/c 4,000
(Being part payment done)
? Interest A/c Dr. 40
To Pankaj A/c 40
(Being interest payable)
To BP A/c 4,040
(Being new bill accepted)
? BP A/c Dr. 4,040

To Pankaj A/c 4,040
To Bank A/c 2,020
(Being Anil became insolvent & 50%
paid off)
38
Q.4
Journal of Vijay
Date Particular L. Debit Credit
F.
1/4/16 Pritam A/c Dr. 1,06,000
To Sales A/c 1,06,000
(Being goods sold on credit)
1/4/16 Bills Receivable A/c Dr. 1,06,000

To Pritam A/c 1,06,000
(Being bill accepted by Pritam)
4/7/16 Bank A/c Dr. 1,06,000

To Bills Receivable A/c 1,06,000
(Being bill honoured by Pritam)
4/4/16 Bank A/c Dr. 1,04,000

Discount A/c Dr. 2,000
4/7/16 NO ENTRY
4/4/16 Chaman A/c Dr. 1,06,000
(Being bill endorsed to chaman)
4/7/16 Pritam A/c Dr. 1,06,500

To Chaman A/c 1,06,500
(Being bill dishonoured & Nothing
Charges of ` 500 paid by
chaman)
41
1/4/16 Bill Sent for Collection A/c Dr. 1,06,000

(Being bill sent to bank for
collection)
4/7/16 Bank A/c Dr. 1,04,500

Commission A/c Dr. 1,500
To Bill Sent for collection A/c 1,06,000
1/6/16 Bank A/c Dr. 1,05,000
Rebate A/c Dr. 1,000
To Bills Receivable 1,06,000
(Being bill retired)
1/7/16 Pritam A/c Dr. 1,06,000
1/7/16 Pritam A/c Dr. 1,767

To Interest A/c 1,767
(1,06,000 × 10% × 2/12)
(Being interest receivable)
1/7/16 Bills Receivable A/c Dr. 1,07,767
(Being new bill accepted by
Pritam)
1/8/16 Pritam A/c Dr. 1,07,767
(Being bill dishonoured due to
insolvency)
1/8/16 Bank A/c Dr. 26,942
(Being 25% of total due from
Pritam
recovered)
42
Q.5
Journal of Chaman
Date Particular L. Debit Credit
F.
1/4/19 Aman A/c Dr. 10,000
To Bills Payable A/c 10,000
1/4/19 No Entry for discounting
1/4/19 Bank A/c Dr. 4,800
[(10,000 × 12% × 4/12)÷ 2)
To Aman A/c 5,000
(Being 1/2 of proceeds received
from Aman)
4/8/19 Bank A/c Dr. 5,000
To Aman A/c 5,000
(Being aman’s share received)
4/8/19 Bills Payable A/c Dr. 10,000
To Bank A/c 10,000
4/8/19 Bank A/c Dr. 5,000
To Aman A/c 5,000
(Being aman’s share received)
To Bank A/c 10,000
4/8/19 Interest A/c Dr. 375

To Aman A/c 375
(10,000 × 15% × 3/12)
(Being interest payable to Aman)
4/8/19 Aman A/c Dr. 10,375
To Bills Payable A/c 10,375
(Being New bill accepted)
43

To Bank A/c 10,375
(Being New bill honoured)

To Bank A/c 10,000
4/8/19 Aman A/c Dr. 42
To Interest A/c 42
(5,000 × 10% × 1/12)
(Being interest receivable from
Aman)
4/8/19 Aman A/c Dr. 5,042
To Bills Receivable A/c 5,042
(Being bill dishonoured due to
insolvency)
7/9/19 Bank A/c Dr. 3,781
Bad debt A/c Dr. 1,261
To Aman A/c 5,042
(Being 75% of total amount due
recovered from Aman)
1/5/19 Bills Receivable A/c Dr. 15,000
To Aman A/c 15,000
(Being bill accepted by Aman)
1/5/19 Bank A/c Dr. 14,625
[(15,000 × 10% × 3/12)
To Aman A/c 15,000
4/8/19 Aman A/c Dr. 2,500
To Bank A/c 2,500
(Being net amount transfer to
Aman)
4/8/19 Bills Receiveable A/c Dr. 10,000
To Bank A/c 10,000
44
1/5/19 Aman A/c Dr. 7,500

To Bank A/c 7,312
To Discount A/c 188
(Being 1/2 amount remitted to
Aman)
45

SGR WAGH Bills of Exchange Full - 20210819 - 210205

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CA FOUNDATION - ACCOUNTANCY

Bank A/c Dr. xx Drawer A/c Dr. xx

To Bills for collection A/c xx Noting Charges A/c Dr. xx

 IMPORTANT POINTS TO REMEMBER

B. Foreign bill of exchange

Bill drawn On person resident in Bill payable

3. Indian currency is promissory note

E. RENEWAL OF BILL (Giving more time for honouring the bill)

F. RETIREMENT OF BILLS OF EXCHANGE & REBATE

G. Distinguish between Bills of exchange & Promissory Notes

Particulars Bills of exchange Promissory Notes

5 Acceptance Required Non required

Particulars Trade Bill Accommodation Bill

5. Rebate on retirement is calculated from date of payment (honour) to due date

7. No consideration is necessary in case of accommodation bill.

11. Bills of exchange is drawn by creditor on debtor (it is accepted by debtor).

12. Bills of exchange is also known as trade bill.

E. Format of Bills of Exchange

Illustration 1: (General Acceptance)

Illustration 2 : (Qualified acceptance)

Stamp Aditi Swapnil Gade.

Accepted for ` 22,500 only

Q.5 Journalise the following transactions in K. Katrak’s books.

b) G. Gupta’s acceptance for ` 4,000 which was endorsed by Katrak to M. Mehta

d) Katrak’s acceptance to Patel for ` 5,000 discharged by Mody’s acceptance to

Q.6 Journalize the following in the books of Don:

11. Bills of exchange can be oral.

13. Noting charges are paid by drawee.

16. A bill given to a creditor is called Bills Receivable.

Q2. Fill in the blanks:

2. In case of bill at sight, days of grace are ________.

3. A bill of exchange matures on 16th July. Suddenly a bank strike declared on

5. Bills of Exchange before acceptance is called __________.

6. Indian currency is ____________.

7. Bills discounted is shown as ____________ in balance sheet.

8. Entries of bills receivable book is individually posted to __________account

9. There are___ parties to bills of exchange whereas ___ parties in promissory

12. Mr. A accepted a 90 days bill of ` 10,000 drawn on B 5/2/2019. On 13/3/2019

13. Endorsement, discounted & collection of Bills of Exchange is made by ________.

14. Fees paid in cash to Notary public is charged by ____________.

15. On 1/6/2018 Bill Receivable of C Ltd. Showed a balance of ` 80,000. During

16. If a bill is drawn on 29/6 for 3 months it will mature on _________.

17. The person to whom bill is addressed is _____________.

18. If a bill is drawn on 28/1/16 for 1 month it will mature on __________.

19. A bill from point of view of creditor is called ____________.

20. ____________is not essential requirement of valid bills of exchange.

21. _________would debit noting charges account in his books.

22. In a firm usually receives large number of promissory notes, it would be

23. A drew on accommodation bill on B for 3 months. Proceeds were to be shared

26. X draws mutual accommodation bill on Y to be shared between Y & X in 3:1.

Q.3 Multiple Choice Questions:

2. On 16.6.2016 P draws a bill on Q for `1,25,000 for 30 days. 19th July is a

3. PQ draws a bill on XY for `130,000 on 1.1.2017. X accepts the same on 4.1.2017

11. On 1.1.2017, XA draws a bill on YB for ` 1,00,000. At maturity YB request XA to

12. A bill of exchange is drawn by a

13. At the time of drawing a bill, the drawer credits

14. A promissory note is made by a

15. A bill of exchange contains

9. There are_ parties to bills of exchange whereas _ parties in promissory