Bill of exchange and the various parties to it. [MTP Jan. 2025]
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Bills of Exchange and Promissory NotesQ-1 | Bills of Exchange and Promissory NotesQuestion 4758 of 26
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Detailed Solution & Explanation
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 to or to the order of
certain person or to the bearer of the instrument. When such an order is accepted by the
drawee on the face of the order itself, it becomes a valid bill of exchange.
There are three parties to a bill of exchange:
(i) The drawer, who draws the bill, that is, the creditor to whom the money is owing;
(ii) The drawee, the person to whom the bill is addressed or on whom it is drawn and
who accepts the bill that is, the debtor; and
(iii) The payee, the person who is to receive the payment. The drawer in many cases is
also the payee.
About This Chapter: Special Transactions
Paper
Paper 1: Accounting
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.
View Official ICAI SyllabusExam Strategy Tip
This topic carries 15-20% weightage. Focus on understanding core concepts rather than memorizing.
Key Concepts to Understand
Related Comparison Tables
More Questions from Bills of Exchange and Promissory Notes
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 On October 1, 2023 the first machine become outdated and sold for 2,50,000.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]
Meaning of Promissory Note
Retirement of bill [RTP Jan. 2025]; [MTP Jan. 2025]
Bill of Exchange and Promissory Note
A promissory note can be made payable to the bearer. [Sep. 2024, 2 Marks]
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]
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