Bills of Exchange and Promissory Notes

26 Practice MCQs available for CA Foundation

Paper

Paper 1: Accounting

Exam Weightage

15-20%

Key Topics

Bills of Exchange, Consignment, Average Due Date

This chapter covers Bills of Exchange, Consignment, Average Due Date and is part of Paper 1: Accounting in the CA Foundation exam.

Exam Strategy Tip

This topic carries 15-20% weightage. Focus on understanding core concepts rather than memorizing.

Key Terms

Promissory Note

An instrument in writing containing an unconditional undertaking signed by the maker to pay a certain sum of money.

Bills Receivable

A negotiable instrument (Bill of Exchange or Promissory Note) received by the creditor from the debtor as an acknowledgement of debt, promising payment on a specified future date. It is an asset in the Balance Sheet.

Bills Payable

A negotiable instrument accepted by the debtor (buyer) acknowledging an obligation to pay a specified sum to the creditor on a future date. It is a liability in the Balance Sheet of the acceptor.

Comparison Tables

Promissory Note vs Bill of Exchange: Negotiable InstrumentsTrade Bill vs Accommodation Bill: Bills of Exchange Comparison

All 26 Questions

4757
A firm purchased a second-hand machinery on April 1, 2021 for 15,00,000 subsequent to which ₹ 2,00,000 were spent on its repairs and installation. On October 1, 2021 another machinery was purchased for 9,00,000 and cost of installing the machine in a new plant is ₹ 20,000. The firm also shifted the machinery purchased on April 1, 2021 to the new plant and incurred freight of 10,000. They adopted a policy of charging depreciation @ 12% per annum on diminishing balance method. On April 1, 2023 it was decided to change the method and rate of depreciation to straight line basis. On this date, the remaining useful life was assessed as 5 years for both the machines purchased with no scrap value. On October 1, 2023 the first machine become outdated and sold for 2,50,000. On the same date, another machinery was purchased for * 8,50,000. The estimated useful life of the machine is 10 years and residual value is ₹ 30,000. You are required to prepare the machinery account for the year ending March 31, 2024. [Jan. 2025, 10 Marks]
Subjective
4758
Bill of exchange and the various parties to it. [MTP Jan. 2025]
Subjective
4759
Meaning of Promissory Note
Subjective
4760
Retirement of bill [RTP Jan. 2025]; [MTP Jan. 2025]
Subjective
4761
Bill of Exchange and Promissory Note
Subjective
4762
A promissory note can be made payable to the bearer. [Sep. 2024, 2 Marks]
Subjective
4763
Promissory Note is different from Bill of Exchange because the amount is paid by the maker in case of former and by the acceptor in the later. [June 2024, 2 Marks]
Subjective
4764
In case of a public holiday, the due date of the bill falls on the next working day. [RTP Jan. 2025]
Subjective
4765
Suresh draws a bill for 15,000 on Anup on 15th April, 2020 for 3 months, which Anup returns to Suresh after accepting the same. Suresh gets it dis- counted with the bank for 14,700 on 18th April, 2020 and remits one-third amount to Anup. On the due date Suresh fails to remit the amount due to Anup, but he accepts a bill of 17,500 for 3 months, which Anup discounts for 17,100 and remits 2,825 to Suresh. Before the maturity of the renewed bill Suresh becomes insolvent and only 50% was realized from his estate on 31st October, 2020. Pass necessary Journal entries for the above transactions in the books of Suresh. [Nov. 2020, 10 Marks]; [MTP Jan. 2025; Modified Figures-3X]
Subjective
4766
Journalise the following transactions in the books of Karthik: (i) Karthik accepted a bill to Balu for 3,500 discharged by a cash payment of 1,500 and a new bill for the balance plus 75 for interest. (ii) Gopal acceptance for 4,500 which was endorsed by Karthik to Mohan was dishonoured. Mohan paid 50 as noting charges. Bill was withdrawn against cheque. (iii) Doshi retires a bill for ₹ 2,500 drawn on him by Karthik for ₹ 25 discount. (iv) Karthik's acceptance to Prem for ₹ 6,500 discharged by Prem. Ashok's acceptance to Karthik for a similar amount. [June 2023, 5 Marks]
Subjective
4767
R draws a bill of exchange on P for 2,00,000 on 1st July, 2022 for 4 months. P accepted the bill and sent it to R. R discounts the bill from his bankers for 1,88,000. R immediately remits 75,200 to P. On the due date, R, being unable to remit the amount due, accepts a bill for ₹ 2,50,000 for 4 months which is discounted by P for 2,36,250. P sends 56,700 to R. Before the bill is due for payment R becomes insolvent, his estate is paying fifty paise in the rupee. Give the journal entries in the books of P. Also show R's account in P's books. [Dec. 2023, 10 Marks]
Subjective
4768
Harry draws a bill on Sejal for ₹ 60,000 on 01.01.2023 for 3 months. Sejal accepts the bill and sends it back to Harry to get it discounted for 56,000. Harry remits 1/4th amount to Sejal. On the due date, Harry was unable to remit his share to Sejal, rather accepts a bill of ₹ 80,000 for a period of 3 months. This bill was discounted by Sejal for 74,600. Sejal after making the payment of first bill sent 3/4th of the amount remaining to Harry. On maturity of the bill, Harry became bankrupt and his estate paying 40 paise in the rupee. Give journal entries in the books of Sejal. Also prepare ledger account of Harry. All workings should form part of the answer. [Sept. 2024, 10 Marks]
Subjective
4769
On 1st April, 2024, X sells goods to Y for 25,000 plus IGST @ 18% and draws two bills of exchange on him; the first bill for 15,000 for 2 months and second bill for the balance for 3 months. Y accepts and returns these bills to X. Both the bills are sent to the bank for collection on 1st April, 2024. In due course, X receives the information from the bank on the due date of the respective bill that the bill for 15,000 has been duly met and the other bill has been dishonored. Noting charges paid on the dishonour of second bill are 500. Pass the journal entries along with narrations in the books of X. [RTP Jan. 2025]
Subjective
5090
A firm purchased a second-hand machinery on April 1, 2021 for 15,00,000 subsequent to which ₹ 2,00,000 were spent on its repairs and installation. On October 1, 2021 another machinery was purchased for 9,00,000 and cost of installing the machine in a new plant is ₹ 20,000. The firm also shifted the machinery purchased on April 1, 2021 to the new plant and incurred freight of 10,000. They adopted a policy of charging depreciation @ 12% per annum on diminishing balance method. On April 1, 2023 it was decided to change the method and rate of depreciation to straight line basis. On this date, the remaining useful life was assessed as 5 years for both the machines purchased with no scrap value. On October 1, 2023 the first machine become outdated and sold for 2,50,000. On the same date, another machinery was purchased for * 8,50,000. The estimated useful life of the machine is 10 years and residual value is ₹ 30,000. You are required to prepare the machinery account for the year ending March 31, 2024. [Jan. 2025, 10 Marks]
Subjective
5091
Bill of exchange and the various parties to it. [MTP Jan. 2025]
Subjective
5092
Meaning of Promissory Note
Subjective
5093
Retirement of bill [RTP Jan. 2025]; [MTP Jan. 2025]
Subjective
5094
Bill of Exchange and Promissory Note
Subjective
5095
A promissory note can be made payable to the bearer. [Sep. 2024, 2 Marks]
Subjective
5096
Promissory Note is different from Bill of Exchange because the amount is paid by the maker in case of former and by the acceptor in the later. [June 2024, 2 Marks]
Subjective
5097
In case of a public holiday, the due date of the bill falls on the next working day. [RTP Jan. 2025]
Subjective
5098
Suresh draws a bill for 15,000 on Anup on 15th April, 2020 for 3 months, which Anup returns to Suresh after accepting the same. Suresh gets it dis- counted with the bank for 14,700 on 18th April, 2020 and remits one-third amount to Anup. On the due date Suresh fails to remit the amount due to Anup, but he accepts a bill of 17,500 for 3 months, which Anup discounts for 17,100 and remits 2,825 to Suresh. Before the maturity of the renewed bill Suresh becomes insolvent and only 50% was realized from his estate on 31st October, 2020. Pass necessary Journal entries for the above transactions in the books of Suresh. [Nov. 2020, 10 Marks]; [MTP Jan. 2025; Modified Figures-3X]
Subjective
5099
Journalise the following transactions in the books of Karthik: (i) Karthik accepted a bill to Balu for 3,500 discharged by a cash payment of 1,500 and a new bill for the balance plus 75 for interest. (ii) Gopal acceptance for 4,500 which was endorsed by Karthik to Mohan was dishonoured. Mohan paid 50 as noting charges. Bill was withdrawn against cheque. (iii) Doshi retires a bill for ₹ 2,500 drawn on him by Karthik for ₹ 25 discount. (iv) Karthik's acceptance to Prem for ₹ 6,500 discharged by Prem. Ashok's acceptance to Karthik for a similar amount. [June 2023, 5 Marks]
Subjective
5100
R draws a bill of exchange on P for 2,00,000 on 1st July, 2022 for 4 months. P accepted the bill and sent it to R. R discounts the bill from his bankers for 1,88,000. R immediately remits 75,200 to P. On the due date, R, being unable to remit the amount due, accepts a bill for ₹ 2,50,000 for 4 months which is discounted by P for 2,36,250. P sends 56,700 to R. Before the bill is due for payment R becomes insolvent, his estate is paying fifty paise in the rupee. Give the journal entries in the books of P. Also show R's account in P's books. [Dec. 2023, 10 Marks]
Subjective
5101
Harry draws a bill on Sejal for ₹ 60,000 on 01.01.2023 for 3 months. Sejal accepts the bill and sends it back to Harry to get it discounted for 56,000. Harry remits 1/4th amount to Sejal. On the due date, Harry was unable to remit his share to Sejal, rather accepts a bill of ₹ 80,000 for a period of 3 months. This bill was discounted by Sejal for 74,600. Sejal after making the payment of first bill sent 3/4th of the amount remaining to Harry. On maturity of the bill, Harry became bankrupt and his estate paying 40 paise in the rupee. Give journal entries in the books of Sejal. Also prepare ledger account of Harry. All workings should form part of the answer. [Sept. 2024, 10 Marks]
Subjective
5102
On 1st April, 2024, X sells goods to Y for 25,000 plus IGST @ 18% and draws two bills of exchange on him; the first bill for 15,000 for 2 months and second bill for the balance for 3 months. Y accepts and returns these bills to X. Both the bills are sent to the bank for collection on 1st April, 2024. In due course, X receives the information from the bank on the due date of the respective bill that the bill for 15,000 has been duly met and the other bill has been dishonored. Noting charges paid on the dishonour of second bill are 500. Pass the journal entries along with narrations in the books of X. [RTP Jan. 2025]
Subjective

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