GSEB Class 11 Solutions Chapter 4 Bills of Exchange

Question 1. Write the Correct Option From Those Given Below Each Question:

Question 1. Generally, who writes (draws) a bill?
(a) Debtor
(b) Creditor
(c) Creditor
(d) Bank
Answer: (b) Creditor
In simple words: The person who creates or makes a bill is typically the creditor, who is owed money by the debtor.

Exam Tip: Remember that the 'drawer' or 'writer' of a bill of exchange is always the creditor, as they are the one extending credit and initiating the payment process.

Question 2. Generally. who accepts a bill?
(a) Debtor
(b) Government
(d) Bank
Answer: (a) Debtor
In simple words: The debtor is the one who accepts the bill because they are the person responsible for paying the money.

Exam Tip: The 'acceptor' of a bill is consistently the debtor, as they acknowledge the debt and agree to pay the stated amount on the due date.

Question 3. Who writes (draws) a promissory note?
(a) Insurance Company
(b) Creditor
(c) Debtor
(d) Government
Answer: (c) Debtor
In simple words: A promissory note is written by the debtor, who promises to pay a certain amount to the creditor.

Exam Tip: A promissory note is a promise made by the payer (debtor), while a bill of exchange is an order given by the payee (creditor).

Question 4. In order to facilitate the payment of money in the transaction of bill, ................ days of grace are allowed.
(a) four
(b) one
(c) three
(d) two
Answer: (c) three
In simple words: To help with making payments, an extra three days are usually given after the bill's due date.

Exam Tip: Days of grace are a legal provision intended to provide a slight buffer for payment after the official maturity date of a bill or note.

Question 5. Before the date of maturity of a bill, from whom is it discounted by the drawer of a bill?
(a) Debtor
(b) State government
(c) Central government
(d) Bank
Answer: (d) Bank
In simple words: If the person who drew the bill needs money quickly before the bill is due, they can sell it to a bank at a lower price.

Exam Tip: Discounting a bill with a bank allows the drawer to receive funds immediately, minus a small fee, providing liquidity before the bill's maturity.

Question 6. Bill is an instrument under which act?
(a) Indian Company Act, 2013
(b) Partnership Act, 1932
(c) Indian Contract Act, 1872
(d) Indian Negotiable Instrument Act, 1881
Answer: (d) Indian Negotiable Instrument Act, 1881
In simple words: Bills of exchange are governed by the specific rules outlined in the Indian Negotiable Instruments Act, which dates back to 1881.

Exam Tip: Knowing the relevant legal acts for financial instruments is crucial for understanding their validity and implications.

Question 7. When the court declares a person as an insolvent, it also appoints an officer for the purpose of distribution (collection) of assets and payment to creditors is known as the :
(a) Receiver
(b) Government advocate
(c) Wellknown advocate
(d) Notary
Answer: (a) Receiver
In simple words: When someone is declared unable to pay their debts, the court appoints a person to collect and distribute their assets to those they owe money to. This person is called a receiver.

Exam Tip: A receiver's primary role is to manage and liquidate the assets of an insolvent entity or individual to repay creditors in an orderly manner.

Question 8. Renewal of a bill means ...................
(a) old bill is being written again in good handwriting.
(b) new revenue stamp is affixed on old bill.
(c) new bill with new period is drawn against old bill.
(d) Bill is sent by e-mail against old bill.
Answer: (c) New bill with new period against old bill.
In simple words: When an old bill is cancelled and a new one is made with a different due date, this process is called renewal.

Exam Tip: Renewal implies a fresh agreement between the parties, often due to the debtor's inability to pay the original bill on time, potentially involving new terms like interest.

Question 2. Answer the Following Questions In One Or Two Sentences:

Question 1. Define a bill.
Answer: The definition of a bill of exchange, according to the Indian Negotiable Instruments Act, 1881, is as follows: "A bill of exchange is an instrument in writing containing an unconditional order, signed by the drawer, directing a certain person to pay a certain sum of money only at a specified time to a certain person or according to his order or to the holder of the instrument."
In simple words: A bill is a written order from one person to another to pay a specific amount of money by a certain date.

Exam Tip: When defining legal terms, it is always best to quote the exact definition from the relevant act, if possible, as this demonstrates precise knowledge.

Question 2. Define a promissory note.
Answer: The definition of a promissory note, as per the Indian Negotiable Instruments Act, 1881, is as follows: "A promissory note is an instrument in writing containing an unconditional undertaking, signed by the drawer to pay a certain sum of money only at a specified time to a certain person or to the holder of the instrument."
In simple words: A promissory note is a written promise to pay a certain amount of money to someone by a specific date.

Exam Tip: Highlight the key difference: a bill is an 'order', while a promissory note is a 'promise'.

Question 3. How many parties are there in a bill?
Answer: There are three parties in a bill: 1. The drawer of a bill, 2. The acceptor of a bill, and 3. The receiver of money, who is also known as the payee of a bill.
In simple words: A bill involves three people: the one who writes it, the one who accepts it, and the one who gets the money.

Exam Tip: Clearly list and define each party (drawer, acceptor, payee) to show full understanding of the bill's structure.

Question 4. How many parties are there in a promissory note?
Answer: There are two parties in a promissory note: 1. The drawer or maker of a promissory note and 2. The payee or receiver of money.
In simple words: A promissory note has two main people: the one who makes the promise to pay, and the one who receives the payment.

Exam Tip: Note the simpler structure of a promissory note with only two direct parties involved, contrasting it with a bill of exchange.

Question 5. What is the terms of bill?
Answer: A specific time frame is allowed for the payment by the bill drawer to the bill acceptor, and this period is called the terms of the bill.
In simple words: The "terms" of a bill refer to the agreed length of time given for the payment to be made.

Exam Tip: The terms of a bill are crucial as they dictate the duration of credit and the ultimate maturity date for payment.

Question 6. What is the maturity date of a bill?
Answer: The maturity date of a bill means the date on which the amount needs to be paid by the acceptor of the bill. This maturity date is figured out by adding the bill's period to the date when the bill was initially drawn.
In simple words: The maturity date is the day when the money on the bill must be paid. It's calculated by adding the bill's period to its starting date.

Exam Tip: Be precise in calculating the maturity date, ensuring to factor in the drawing date and the agreed period, along with any days of grace.

Question 7. What are the days of grace?
Answer: To help with the payment of money in a bill transaction, three days of grace are added to the calculated due date. This additional three-day period, which is determined after adding the bill's period to its drawing date, is known as days of grace.
In simple words: Days of grace are three extra days added to the bill's maturity date, giving the payer a bit more time to make the payment.

Exam Tip: Always remember to add the three days of grace when determining the legal maturity date of a bill, unless it is a "bill at sight."

Question 8. What is bill at sight?
Answer: The acceptor of a bill at sight is required to pay the amount immediately whenever the holder demands payment. Such a bill is known as a bill at sight.
In simple words: A "bill at sight" means the money must be paid as soon as the bill is shown to the person who needs to pay.

Exam Tip: Bills at sight have no days of grace because payment is due immediately upon presentation.

Question 9. What is bill after dated?
Answer: The acceptor of a bill after dated is required to pay the amount of the bill after a specified or definite period. Since a specific period is allowed for the payment of the bill's amount, it is known as a bill after dated.
In simple words: A "bill after dated" is one where payment is due only after a certain, agreed-upon period has passed from the bill's date.

Exam Tip: Contrast "bill after dated" (payment due after a period) with "bill at sight" (payment due immediately) to clearly differentiate between the two types.

Question 3. Answer the Following Questions In Detail:

Question 1. Define bill and state its characteristics.
Answer:
Meaning: A bill is a written document sent by a creditor to his debtor, stating an unconditional order to pay a certain amount within a specified time, either according to the creditor's instructions or to the person holding the document.
Definition: A bill is an instrument in writing containing an unconditional order signed by the drawer, directing a specific person to pay a certain sum of money only, at the specified time, to a particular person or according to their order, or to the holder of the document.
Characteristics of a bill:
• The bill must always be in writing.
• The written order in a bill must be proper and not just a request.
• Any order made in the bill should be unconditional.
• This order states that a certain amount is to be paid to a specific person or according to their instructions, or to the person who holds the bill.
• The signature of the drawer of a bill is compulsory.
• The required amount of revenue stamp (not a postal stamp) must be put on the bill.
• The bill becomes effective only after the acceptor agrees to it.
• The bill is drawn by one person to another. This means there must be three parties: the drawer, the acceptor, and the receiver of money (payee).
• The holder of the bill will receive the payment at the end of the specified period.
• The duration or period of the bill must be definite.
• The date when the bill is written must be definite.
• The amount shown in the bill must be clear and definite. The amount is usually shown both in figures and words.
In simple words: A bill of exchange is a written instruction telling someone to pay a fixed amount of money by a specific date. It must be written, unconditional, signed, and stamped. It only works after being accepted, and it always involves three parties: the drawer, acceptor, and payee. The bill's period, date, and amount must be clearly stated.

Exam Tip: When explaining characteristics, use bullet points for clarity and ensure each point describes a distinct feature of the bill of exchange.

Question 2. Give the specimen of a bill and explain its details.
Answer: (The specimen of a bill, an image, is omitted as per instructions for non-SVG graphics.)
Details of the bill: From the above specimen of the bill, the following details are available:
1. Parties:
(i) Drawer of the bill: Shri Bipinbhai Patva
(ii) Acceptor of the bill: Shri Bharatkumar Vadilal Gandhi
(iii) Receiver of money: Shri Paresh V. Shah
2. Amount: The amount payable by the acceptor must be clearly shown in the bill. The amount is generally shown both in figure and words. For example, in the given specimen, it is shown as Rs. 6,000 and "Rupees six thousand only."
3. Date: In the specimen given above, the bill's date is 9-6-18. The date is a crucial part of a bill because the maturity date depends on the bill's date and its period.
4. Period: The period after which the amount is payable must be clearly indicated in the bill. In the specimen provided, the period is two months.
5. Revenue stamp: For legal validity, it is necessary to affix a revenue stamp in proportion to the bill's amount.
6. Signature: The signatures of both the drawer and the acceptor are compulsory on the bill.
In simple words: A bill has several key parts: the people involved (drawer, acceptor, payee), the exact amount to be paid (in numbers and words), the date the bill was written, the length of time until it's due, a revenue stamp for legal reasons, and signatures from both the person who wrote it and the person who accepted it.

Exam Tip: When asked to explain a specimen, break down the details into logical categories like parties, amounts, dates, and legal requirements, ensuring all aspects are covered.

Question 3. Define promissory note and state its characteristics.
Answer:
Meaning: A promissory note means a written promise given by a debtor or payer of money to their creditor for the payment of money after a certain period. A promissory note is also an instrument, similar to a bill of exchange, used to clear debts and dues.
Definition: A promissory note is a written document signed by the maker, for the value received, giving an unconditional undertaking to pay a certain amount to a specified person or to the holder of the document or to their order.
Characteristics of a Promissory note:
• A promissory note is written by a debtor.
• In a promissory note, an unconditional written promise to pay money is given.
• The payable amount is to be given to a specified person or to the holder of the document or to their order.
• The amount mentioned in the promissory note must be definite.
• The signature of the drawer of the promissory note is required.
• Depending on the amount of the promissory note, a necessary revenue stamp must be affixed.
• If the date is not stated on the promissory note, the date it was delivered is treated as the date of the promissory note.
• A promissory note that says 'To pay the bearer' is not seen in transactions because such a note becomes a currency note.
• A promissory note is written by the debtor themselves, so the question of acceptance does not arise.
• The duration of the promissory note must be clearly stated.
There are two parties in a promissory note:
• Drawer or Maker of the promissory note and
• Receiver of money (Payee.)
In simple words: A promissory note is a written promise by a debtor to pay money to a creditor after some time. It must be written, unconditional, for a definite amount, and signed by the maker. It has two parties: the maker (debtor) and the payee (creditor).

Exam Tip: Clearly distinguish between the meaning, definition, and characteristics. Pay attention to how the roles of drawer/maker differ between a bill and a promissory note.

Question 4. Give the specimen of a promissory note and explain its details.
Answer: (The specimen of a promissory note, an image, is omitted as per instructions for non-SVG graphics.)
Details of the Promissory note: From the above specimen of the Promissory note, the following details are available:
1. Parties:
(i) Drawer of promissory note: Rina Shashankbhai Dudhwala.
(ii) Receiver of money: Shri Shalin Kothari
2. Amount: The amount payable by the drawer (maker) should be clearly stated in the promissory note. The amount is generally shown both in figure and words. For example, in the above specimen, it is shown as Rs. 5,000 and "Rupees five thousand only."
3. Date: Generally, the date on which the promissory note is drawn (made) is also the date shown on the promissory note. Here, the promissory note's drawing date is 10-6-18.
4. Period: The period after which the amount is payable must be clearly shown in the promissory note. In the specimen provided above, the period is three months.
5. Signature: It is necessary for the promissory note to be signed by its drawer (maker) to be a valid document. In the above specimen, Rina Shashankbhai Dudhwala is the maker of the promissory note, so her signature on the note is essential.
6. Revenue stamp: For legal recognition, it is necessary to affix a revenue stamp in proportion to the amount of the promissory note.
In simple words: A promissory note outlines who promises to pay and who will receive the money. It states the exact amount, the date it was made, and how long until it's due. The maker must sign it, and a revenue stamp is required for it to be legal.

Exam Tip: When analyzing a specimen, ensure you clearly identify the maker and payee, as these are the two primary parties in a promissory note.

Question 5. Explain the difference between Bill of Exchange and Promissory Note.
Answer:

Exam Tip: Use a comparative table to clearly show differences, focusing on key aspects like the nature of the instrument (order vs. promise), parties involved, and acceptance requirements.

Question 6. What is bill receivable and bill payable?
Answer:
Bill receivable: This is a bill receivable for the person who draws the bill. Generally, the drawer of a bill receivable is a creditor. A bill receivable is an asset for the bill's drawer. For example, Sona needs to receive Rs. 9,000 from Rupa. Here, Sona would draw a bill of Rs. 9,000 on Rupa, and Rupa would accept it. In this situation, this bill is a bill receivable for Sona. When the bill's drawer and the payee are different people, it is considered a bill receivable for the bill's holder. Bills receivable appear as a current asset in the Balance Sheet.
Bill payable: This is a bill payable for the person who accepts the bill. Generally, the acceptor of a bill is a debtor. A bill payable is a liability for the drawee (acceptor) of the bill. Bills payable appear as current liabilities in the Balance Sheet. In the example above, a bill is a bill payable for Rupa.
In simple words: A bill receivable is money owed to you, like an asset, from someone else who accepted your bill. A bill payable is money you owe, like a debt, to someone else who drew a bill on you.

Exam Tip: Remember that a single bill represents both a receivable for the drawer (asset) and a payable for the acceptor (liability), impacting their respective balance sheets.

Question 7. Explain the main four methods or alternatives of the disposal or uses of a bill.
Answer: The bill's drawer or holder can use the bill in any of the four methods listed below:
1. To keep the bill until the maturity date: If the bill's drawer does not need money earlier than the maturity date, or if the bill's period is very short, they keep the bill until maturity and collect the money from the debtor (bill acceptor) on the due date.
2. To discount the bill: If the bill's holder needs money before the maturity date, they can get funds by discounting the bill with a bank or shroff. When discounting, the bank or shroff deducts interest from the date of payment until the bill's legal maturity date. This deducted amount is known as the discount for the trader who discounted the bill. By doing this, the holder loses ownership rights, and the bank or shroff obtains ownership. Therefore, on the maturity date, the bank or shroff will collect the amount of the bill from the acceptor.
3. To endorse a bill: A bill is a transferable document (Negotiable instrument). Therefore, the bill's holder, with their creditor's consent, can settle their debt by giving the bill receivable against their own debts. This involves making a note and the necessary signature on the back of the bill. This process is called endorsement of a bill. On the maturity date, the creditor will collect the amount.
4. To give (To send) the bill for collection: In business, if there are many bill transactions and the trader is busy with various business activities, they might send the bill to a bank or shroff for collection. This helps save time and provides convenience. They send the bill to the bank or shroff before the maturity date. The bank or shroff collects the money on behalf of the trader and charges a commission at a set rate.
In simple words: A bill can be used in four ways: holding it until it's due, selling it early to a bank for cash (discounting), giving it to someone else to pay off your own debt (endorsing), or sending it to a bank to collect the money for you.

Exam Tip: Clearly describe each method of bill disposal, explaining when and why each method would be used, and its implications for the parties involved.

Question 8. What is dishonour of a bill ? Discuss about the entries of the dishonour of a bill.
Answer:
Dishonour of bill: Sometimes, if the bill's acceptor is unable to make the payment on the due date, then it is known as dishonour of a bill. This can happen due to a money crisis, the acceptor's insolvency, or other reasons if payment is not made. It is important to inform all relevant parties in time.
Procedure for entry of a dishonoured bill: When a bill is dishonoured, its holder goes to a notary for an official entry of the dishonoured bill. While not compulsory by law, this noting is advisable. When the dishonoured bill is presented to this officer, they present the bill again to the acceptor.
If the acceptor cannot pay the money, or if the money is not paid by them, the notary records the dishonour of the bill in their record books and issues a certificate for noting the dishonour to the bill's holder.
The fees charged by the officer for this entry are called noting charges. The bill's holder initially pays these charges, but later they can collect the amount from the acceptor of the bill, as the final legal responsibility for paying the noting charges falls on the acceptor.
In simple words: When a bill isn't paid on time, it's "dishonoured." To make it official, the bill's holder takes it to a notary who records the non-payment. The notary's fees (noting charges) are initially paid by the holder but are ultimately the acceptor's responsibility.

Exam Tip: Define dishonour clearly, then detail the step-by-step procedure for noting a dishonoured bill, including who pays the noting charges initially and ultimately.

Question 9. Write a short note on insolvency of the acceptor of a bill.
Answer: When the court declares the bill's acceptor as insolvent, the drawer or holder of the bill records the dishonour of the bill in their books on the same date. The receiver, appointed by the court, takes possession of the insolvent person's assets, disposes of them, and distributes the proceeds among the liabilities according to their legal rights. This payment is made proportionally based on the assets' proceeds, which usually is not the full amount. The payment received is legally known as a dividend. Any amount not received by the creditor is recorded in their books as bad debts. This way, the drawer tries to close the creditor's account by debiting the received amount and bad debts, and crediting the creditor's account (the acceptor's account), while the acceptor or the insolvent person only records the amount they pay.
In simple words: If a bill's acceptor becomes insolvent, the court appoints a receiver to manage their assets. The receiver sells assets and pays creditors proportionally. Any unpaid amount becomes a bad debt for the drawer, while the acceptor only accounts for what they actually pay.

Exam Tip: Explain the impact of insolvency on both the acceptor and the drawer, clarifying terms like 'receiver' and 'dividend' in this context.

Question 10. What is renewal of a bill? Which points are considered in that?
Answer:
Meaning of Renewal of a bill: Sometimes, when a bill's acceptor is unable to pay on the due date, they must dishonour the bill. This negatively impacts their credit and reputation in the market, and they face legal action for non-payment. In these situations, the acceptor contacts the drawer before the maturity date and requests a new bill for a new period against the old one. If the drawer agrees, the old bill is cancelled, and a new bill comes into existence. When a new bill for an extended period is given in exchange for an old bill, this is known as Renewal of a bill or a change in the bill period.
Points to be considered:
• Cancel the old bill, treating it as dishonoured, and pass the necessary journal entries in the books of both parties.
• Calculate interest for the additional period due to the bill's extension and record its accounting effects.
• Provide the accounting entry for the acceptance of the new bill.
Why is interest calculated?: When a bill is renewed, the acceptor sometimes pays some amount to the drawer, and the drawer writes a new bill for the remaining amount. At this time, the acceptor must pay interest for the period of the new bill. This interest amount is an expense for the acceptor, so they will debit this amount to the interest account. For the drawer, this interest amount is an income, so they will credit this amount to the interest account.
In simple words: Renewal of a bill happens when the acceptor can't pay, so they ask the drawer to replace the old bill with a new one that has a later due date. This means cancelling the old bill, calculating interest for the extra time, and making new accounting records.

Exam Tip: Clearly differentiate between the meaning of renewal and the practical steps involved, especially the critical role of interest calculation for the extended period.

Question 11. Write a short note on Accommodation bill.
Answer:
Accommodation bill: Generally, a creditor writes a bill for dues owed by a debtor, which the debtor accepts. This document is known as a bill. However, sometimes two people or traders, to meet their immediate short-term financial needs, write a bill that is known as an accommodation bill. The bill's drawer, after receiving the bill (after acceptance), discounts it with a bank or shroff. This money is then used by both the drawer and the drawee of the bill. After discounting the bill, the discount is shared by both parties in proportion to the amount they received. If both parties have good credit in the market and there is a possibility of payment on the due date, then the bank or shroff discounts this bill. The purpose of writing the bill is for mutual assistance and to acquire funds for some time.
Forms of accommodation bill: Accommodation bills can be found in three different forms, as shown below:
1. The drawer of the bill keeps the full amount of the bill with them: The bill's drawer writes the bill for their own accommodation. After discounting the bill with a bank or shroff, the drawer keeps the entire amount and sends the bill's amount to the acceptor before the maturity date.
2. The bill's amount is distributed in a definite proportion: When both parties need money, with mutual understanding, one party draws a bill for a specific amount, and the other party accepts it. Afterward, the bill is discounted with a bank or shroff, and the received amount is shared in an agreed proportion, along with the discount amount. Before the maturity date, the bill's drawer sends a proportionate amount to the acceptor.
3. Both parties draw bills on each other: In an accommodation bill, if the drawer does not send their share of the amount to the acceptor by the maturity date, the acceptor will face difficulty. Therefore, the other bill is drawn for an amount equal to the drawer's share, which the drawer of the first bill will accept. Often, both parties draw bills on each other for equal amounts so that the issue of sending money before the maturity date does not arise.
In simple words: An accommodation bill is created when two people need money quickly and agree to help each other by drawing and accepting a bill, which is then discounted at a bank. The money and discount are shared between them, and there are different ways this sharing can happen, depending on their agreement.

Exam Tip: Emphasize that accommodation bills are for mutual financial assistance, not for trade transactions. Describe the various forms to illustrate different sharing arrangements between the parties.

Question 4. Answer the Following Questions:

Question 1. Hetansh sold goods of Rs. 60,000 on two months credit to Hiren on 1-6 -'16. On 2-6-'16, Hetansh drew a bill of the necessary amount on Hiren, which Hiren accepted and returned. Hiren paid the money of the bill on the maturity date. Pass necessary journal entries in the books of both the parties.
Answer:
Journal of Hetansh

Exam Tip: When providing journal entries for both parties in a bill transaction, ensure that the corresponding debit and credit entries are correctly matched in each party's books for every transaction.

Question 2. Sunny sold goods of Rs 52,000 to Vishnubhai on 16-6-'16, against which Vishnubhai accepted a three months of bill of Rs 52,000 on 20-6-'16. On 2-7-'16, Sunny discounted this bill with the bank at a discount of Rs 520. Vishnubhai paid the bill on the maturity date. Pass necessary journal entries in the books of both the parties.
Answer:

Journal of Sunny

Journal of Vishnubhai

Exam Tip: For problems involving discounting, remember to record the discount amount as an expense for the drawer of the bill.

Question 3. Palak sold goods of Rs 48,000 on credit to Ansh on 15-5-'16. On the same day, Palak drew a bill on Ansh for 60 days, which Ansh accepted. On 25-5 -'16 Palak endorsed this bill in favour on a creditor Jinal. The amount of the bill was paid on the maturity date. Pass necessary journal entries in the books of Palak and Ansh.
Answer:
Date of drawing the bill Dt. 15-5-'16
+ Period of the bill 60 Days
. . Maturity date of the bill Dt. 14-7-'16
+ Days of grace 3 Days
. . Legal maturity date of the bill Dt. 17-7-'16

Journal of Palak

Journal of Ansh

Exam Tip: When a bill is endorsed, the original drawer transfers their right to receive payment to another party. Make sure to record the transfer correctly in the journal entries.

Question 4. Sajid drew a bill of Rs 28,000 for 2 months on Aamir on 14-6-'16. Aamir accepted and returned the bill. On 6-8-'16, Sajid sent this bill to the bank for collection. The bill was paid on the maturity date by Aamir. The bank debited Rs 120 to Sajid's account as commission. Pass necessary journal entries in the books of both the parties.
Answer:
Date of drawing the bill Dt. 14-6-'16
+ Period of the bill 2 months
. . Maturity date of the bill Dt. 14-8-'16
+ Days of grace 3 Days
. . Legal maturity date of the bill Dt. 17-8-'16

Journal of Sajid

Journal of Aamir

Exam Tip: Remember to include the bank commission as an expense when a bill is sent for collection and the bank charges for this service.

Question 5. Dashrathbhai sold goods of Rs 1,00,000 to Aakash on credit, for which Dashrathbhai drew a three months bill of Rs 1,00,000 on Aakash, which Aakash accepted and returned. Aakash could not pay the money on the maturity date and noting charges amounted to Rs 910 which Dashrathbhai paid in cash. Pass necessary journal entries in the book of both the parties.
Answer:

Journal of Dashrathbhai

Journal of Aakash

Exam Tip: When a bill is dishonoured, the original entry for the bill receivable/payable is reversed, and the debtor's account is re-established along with any noting charges incurred.

Question 6. On 1-8-'16 Jayeshbhai sold goods of Rs 60,000 to Dhaval on credit. On 3-8-'16, Jayeshbhai drew two months bill on Dhaval, which Dhaval accepted and returned. On 6-8-'16, Jayeshbhai discounted this bill with the bank at 10 % p. a. Dhaval could not pay the money on the maturity date. The bank debited an amount of Rs 60,500 to Jayeshbhai's account along with noting charges. Pass necessary journal entries in the books of Jayeshbhai and Dhaval.
Answer:

Journal of Jayeshbhai

*Note: Discount = \( 60,000 \times \frac { 10 }{ 100 } \times \frac { 2 }{ 12 } = \text{Rs } 500 \)

Journal of Dhaval

Exam Tip: When a discounted bill is dishonoured, the bank will debit the drawer's account for the bill amount plus any noting charges, and this must be accurately reflected in the journal entries.

Question 7. On 2-9-'16, Rajan sold goods of Rs 89,000 to Namrata on credit. On 4-9-'16, Rajan drew a three months bill of Rs 89,000 on Namrata, which Namrata accepted and returned. Rajan endorsed this bill to his creditor Arjun on 6 -9 -'16. The bill was dishonoured on the maturity date and Arjun paid noting charges of Rs 440. Pass necessary journal entries in the books of all the parties.
Answer:

Journal of Rajan

Journal of Namrata

Journal of Arjun

Exam Tip: For endorsed bills, when the bill is dishonoured, the endorser (Rajan in this case) becomes liable to the endorsee (Arjun), and the original debtor (Namrata) again becomes liable to the endorser.

Question 8. On 1-8- '16 Dharmesh drew a one month bill of Rs 75,000 on Avadh, which Avadh accepted and returned. On 28 -8 -'16, Dharmesh sent this bill for collection through bank. The bill was dishonoured on the maturity date. The bank debited the amount including noting charges Rs 375 and bank commission 225 to Dharmesh's account. On 25-9-'16, Avadh made the payment payable to Dharmesh by a cheque. Pass necessary journal entries in the books of Dharmesh and Avadh.
Answer:

Journal of Dharmesh

Journal of Avadh

Exam Tip: Note that bank commission is an expense for the drawer, while noting charges are ultimately borne by the acceptor, even if initially paid by the drawer.

Question 9. On 16 -6-'16, Sanjay sold goods of Rs 78,000 to Harnish. On 20-6-'16, Sanjay drew a bill of the necessary amount and period of bill is four months on Harnish, which Harnish accepted and returned. On 15-10-′16, Harnish requested Sanjay to cancel the old bill and drew a new bill for two months period along with the interest Rs 1,600. Sanjay agreed to the request of Hamish and drew a new bill for the required amount, which Hamish accepted. Harnish paid the money on the maturity date. Write journal entries in the books of Sanjay and Harnish.
Answer:

Journal of Sanjay

Journal of Harnish

Exam Tip: When renewing a bill, remember to pass entries for cancelling the old bill, recording interest on the new period, and then accepting and eventually settling the new bill.

Question 10. On 1 – 11 -'16, Kamalbhai sold goods of Rs 2,50,000 to Vishal. On 3-11 -'16, Kamalbhai drew a four months bill of Rs 2,50,000 on Vishal, which Vishal accepted on the same day. On 26-2-'17, Vishal gave a cheque of Rs 50,000 and requested Kamalbhai to cancel the old bill and draw a new bill along with interest of Rs 3,000 for 30 days. Kamalbhai agreed to the request of Vishal and drew a bill for the required amount including interest, which Vishal accepted. Before the maturity date on 24-3-′17, Vishal was declared insolvent and on 15-4-'17, received the final dividend at 40 paise from his receiver. Write journal entries in the books of Kamalbhai and Vishal.
Answer:

Journal of Kamalbhai

Journal of Vishal

Exam Tip: For insolvency cases, calculate the amount of dividend received (e.g., 40 paise per rupee) and consider the remaining unpaid amount as bad debt. Ensure all related entries, including bill cancellation and new bill acceptance, are correctly recorded.

Question 11. Record the following transactions in the books of Abraham: 2016
July 1 Drew a bill of Rs 24,000 on Karina, which she accepted and returned. The period of the bill is of 45 days.
3 Accepted a one month period bill of Rs 28,000 drawn by Abhishek and returned it.
5 Endorsed a bill receivable of 32,500 received from Ranbir to Dipika in full settlement of an account of 33,000.
7 Sold goods of Rs 48,000 to Priyanka and drew a two monthly bill of Rs 40,000 on her which she accepted and paid the remaining amount by cheque immediately.
10 A bill of Rs 55,000 drawn by us and accepted by Imran will mature on 16-7-'16. Because of this, bill was sent to bank for collection today.
12 Karina was declared insolvent and her receiver paid the final dividend at 40 paise.
16 Imran dishonoured the bill and the bank debited to our account an amount including noting charges Rs 350 and charges for bill collection Rs 250.
18 Imran gave a cheque of 50 % amount of the total accepted a new 2 months bill for the remaining included in the amount of the new bill.
Answer:

Journal of Abraham

Exam Tip: For complex problems with multiple transactions, it's helpful to maintain a clear timeline and identify which accounts are affected (debited or credited) for each specific event, such as a bill being accepted, dishonoured, or renewed.

Question 12. Record the following transactions in the books of Kiritbhai: 2016
Dec 2 Sold goods of Rs 49,000 to Pavan on two months credit.
4 Pavan paid cash Rs 9,000 and sent a promissory note of two months period for the remaining amount.
6 Sold goods of Rs 28,000 to Pavan at 10 % cash discount.
8 Pavan returned 50 % of goods from the goods purchased on Dt. 6th by him.
10 Sold goods of Rs 90,000 to Pavan on three months credit.
12 Pavan endorsed his bill receivable of 45,000 in our favour
14 Pavan returned goods of Rs 12,000 to us from his purchases on Dt. 10.
18 Pavan paid 16,000 by cheque against his account.
20 We drew a bill on Pavan for the required amount to settle his account, which Pavan accepted and returned.
Answer:

Journal of Kiritbhai

Exam Tip: Pay close attention to dates and types of instruments (cash, promissory note, bill of exchange) when recording transactions, and always adjust for sales returns and discounts accurately.