COCEDUCATION.

COM CMA Inter Gr -1 Marathon CA/CMA Santosh kumar

CHAPTER – 3 BILLS OF EXCHANGE

According to Section 5 of Negotiable instrument Act 1881, A Bill of Exchange has been defined as:

“An instrument in writing containing an unconditional order signed by the maker directing 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”.

Essential features of bill of exchange are as follows: -

i. It must be in writing.
ii. It must be dated.
iii. It must contain an order to pay a certain sum of money.
iv. The promise to pay must be unconditional.
[Link] money must be payable to a definite person or to his order to the bearer.
[Link] draft must be accepted for payment by the party to whom the order is
[Link] should be properly stamped.
viii. Payment must be in legal currency of the country.

Classification of Bills of Exchange:

(i) Documentary Bill - In this, the bill of exchange is supported by the relevant documents that confirm
the genuineness of sale or transaction that took place between the seller and buyer.
(ii) Clean Bill - This bill does not have any proof of a document, so the interest is comparatively higher than the
other bills.
(iii) Demand Bill - This bill is payable when it demanded. The bill does not have a fixed date of payment,
therefore, the bill has to be cleared whenever presented.
(iv) Usance Bill - It is a time-bound bill which means the payment has to be made within the given time period.
(v) Inland Bill - An Inland bill is payable only in one country and not in any other foreign country. This bill
is opposite to the foreign bill.
(vi) Foreign Bill - A bill that can be paid outside India is termed as a foreign bill. Two examples of a foreign
bill are an export bill and import bill.
(vii) Trade Bill - This kind of bill is specially related only to trade.
(viii) Accommodation Bill - A bill that is sponsored, drawn, accepted without any condition is known as an
accommodation bill.
(ix) Supply Bill - The bill that is withdrawn by the supplier or contractor from the government department
is known as the supply bill.

Parties to Bill of Exchange: The parties involved in transaction that uses bill of exchange as a mode
ofsettlement are:

(a) Drawer: He is a person who draws the bill. Typically, he is the seller or a creditor.
(b) Drawee: He is the person on whom the bill is drawn. Normally, he is the buyer or debtor. He has to
paythe amount of the bill to the drawer on the due date.
(c) Payee: He is the person to whom the amount of bill is payable. He may be the drawer himself or the
creditor of the drawer.

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Difference between trade bill and accommodation bill:

Trade bill Accommodation bill
Objective These bills are drawn to facilitate the trade These bills are drawn to help someone in
transactions of sale and purchase of goods. need of financial assistance.
Consideration There is a definite consideration for which the These bills are drawn without consideration.
bill is accepted.
Extension of Trade bills are a form of credit extension. These bills are not a form of credit extension.
credit
Proceeds When trade bills are discounted, the proceeds When these bills are discounted, the proceeds
remain with the holder. may be shared by two parties in the agreed
ratio.
Recovery If the trade bills are dishonoured, the amount In case of dishonour of these bills, the drawer
may be recovered easily through the court. cannot file a suit against the drawee.

Term of bill: The term of bill of exchange may be of any duration. Usually, the term does not exceed 90
days from the date of the bill.
Date of maturity of the bill: - The date which comes after adding three days to the expiry date of a bill,
is called the date of maturity. Every bill of exchange gets matured on the third day after the day on which it
is expressed to be payable, except when it is expressed to be payable:
i. on demand,
ii. at sight, or
3 date ka grase period nahi miga ya 3 chizo ma
iii. on presentment

How to calculate due date of the bill: -

Case Due Date
(a) When the bill is made payable on a specific date. (a) That specific date will be the due date.

(b) When the bill is made payable at a stated number (b) That date on which the term of the bill shallexpire
of months(s) after date. (plus 3 days of grace period) will be the due date.

(c) When the bill is made payable at a stated number (c) That date which comes after adding stated number of
of days after date. days to the date of bill, shall be the due date.
plus 3 days of grace
Note: The date of Bill is excluded. period) will be the
due date.
(d) When the due date is a public holiday. (d) The preceding business day will be the due date.

(e) When the due date is an emergency/due (e) The next following normal day will be thedate.
unforeseen holiday.

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IMPORTANT POINT FOR REVISION: -

i. Grace period of 3 days are allowed for calculating due date of bill (except in case of ‘at sight, on
demand, on presentation of bill’.
ii. When date of bill drawn and date of acceptance of bill are different, then bill can be classified into 2 parts:
a. After sight bill -due date is calculated from date of bill accepted.
b. After date bill dur date is calculates from the date of bill drawn

REVISION OF JOURNAL ENTRIES IN CASE BILL IS HONOURED ON DUE DATE: -

Transactions In the book of drawer(x) In the book of drawee (y)

[Link] sold Y account Dr Purchase account Dr
To sales account To X Account
[Link] drawn Bills receivable account Dr X Account Dr
To Y account To B/P account
3a. Bill kept till maturity No entry No entry

3b. Bill is discounted Bank account Dr

Discount account Dr No entry

To bills receivable account

3c. Bill endorsed Creditor account Dr
To bills receivable account No entry

3d. Bill sent for collection Bill sent for collection account Dr To No entry
bills receivable account

4a. bill kept till maturity and Cash/bank a/c Dr B/P A/c Dr
honoured To bills receivable account To cash/bank account

4b. bill discounted/ endorsed and No entry B/P A/c Dr

honoured on due date To cash/bank account

4c. bill sent for collection and Bank a/c Dr

honoured on due date To bill sent for collection account B/P A/c Dr
To cash/bank account
Bank charges a/c Dr
To bank account

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IF BILL IS DISHONOURED ON THE DUE DATE: -

Kept till maturity Discounted endorsed Sent for collection
In the book of Y account Dr Y account Dr Y account Dr Y account Dr
drawer(X) To B/R account To bank account To creditor A/C To bill sent for
To cash account collection A/C
To bank account

In the book of Bills payable A/c Dr Bills payable A/c Dr Bills payable A/c Dr Bills payable A/c Dr
drawee (Y) Noting charges Dr Noting charges Dr Noting charges DrTo Noting charges Dr
To X account To X account X account To X account

Transactions In the book of drawer (X) In the book of drawee (Y)

Interest accrued Y account Dr Interest account Dr
To interest account To X account

Final settlement in case of Cash account Dr X account Dr

insolvency Bad debts account Dr To cash account
To Y account To deficiency account

Practice question 1. On 1st April 2024, COC Ltd sold goods costing ₹35,000 for ₹50,000 to Alok. COC received
₹10,000 immediately in cash and for the balance amount, received his acceptance payable after 3 months.
On 4th May 2024, COC discounted bill with his bank at discount of 12%P.A.
On the due date of the bill, Alok was not able to pay the bill and hence the bill was dishonored.
Noting charges paid ₹500.
After negotiation, On 10th July, Alok agreed to pay 40% of the dues immediately and to accept a new bill for the
balance amount for 1 month with interest at 12% P.A..
On the due date of renewed bill, Alok became insolvent and only 80% of the amount could be received as first and
final dividend. Make journal entries in the book of both the parties.

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Solution: Journal entries in the book of both the parties: -

Date COC Alok
1st April Alok account Dr 50,000 Purchase account DrTo
To sales account 50,000 COC account
(Being sales made)
Cash account Dr 10,000 COC account Dr 10,000
To Alok account 10,000 To cash account 10,000
st
1 April Bills receivable account Dr 40,000 COC Account Dr 40,000
To Alok account 40,000 To Bills payable account 40,000
(Being bill drawn)
4th May Bank account Dr 39,200
Discount account Dr 800 No entry
To bills receivable account 40,000
(Being bill drawn)
4th July Alok account Dr 40,500 Bills payable account Dr 40,500
To bank account 40,500 To COC account 40,500
(Being bill dishonored)
10th July Cash account Dr 16,200 COC Account Dr 16,200
To Alok account 16,200 To cash account 16,200
(Being 40% amount received)
10th July Alok account Dr 243 Interest account Dr 243
To interest account 243 To COC account 243
( 24,300 X 12% X 1/12
th
10 July Bills receivable account Dr 24,543 COC Account Dr 24,543
To Alok account 24,543 To Bills payable account 24,543
(Being new bill drawn)
th
13 August Alok account Dr 24,543 Bills payable account Dr 24, 543
To bills receivable account 24, 543 To COC account 24, 543
(Being new bill dishonored)
th
13 August Cash account Dr 19,634 COC account Dr 24, 543
Bad debt account Dr 4,909 To cash account 19,634
To Alok account 24, 543 To deficiency account 4,909

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Practice Question 2. Journalise the following transactions in the book of Katrak.

(i) Katrak’s Acceptance to Basu for ₹ 2,500 discharged by a cash payment of ₹ 1,000 and new bill for the
balance plus ₹ 50 for interest.

(ii) 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.

(iii) D. Dalal retires a bill for ₹ 2,000 drawn on him by Katrak for ₹ 10 discount.

(iv) Katrak’s acceptance to Patel for ₹ 5,000 discharged by giving Mody’s Acceptance to Katrak for a similar
amount.

Answer: Book of K. Katrak-- Journal Entries

Particular ₹ ₹
(i) Bills Payable Account (old) Dr. 2,500
Interest Account Dr. 50
To Cash A/c 1,000
To Bills Payable Account (new) 1,550
(Bills Payable to Basu discharged by cash payment of ₹ 1,000 and
a new bill for ₹ 1,550 including ₹ 50 as interest)

(ii) (a) G. Gupta Dr. 4,020

To M. Mehta 4020
(G. Gupta’s acceptance for ₹ 4,000 endorsed to M. Mehta
Dishonoured, ₹ 20 paid by M. Mehta as noting charges)

(b) M. Mehta Dr. 4,020

To Bank Account 4,020
(Payment to M. Mehta on withdrawal of bill earlier received from
Mr. G. Gupta)
(iii) Bank Account Dr. 1990
Discount Account Dr. 10
To Bills Receivable account 2,000
(Payment received from D. Dalal against his acceptance for
₹ 2,000. Allowed him a discount of ₹ 10)
(iv) Bills Payable Account Dr. 5,000
To Bills Receivable Account 5,000
(Bills Received from Mody endorsed to Patel in settlement of bills
Payable issued to him earlier)

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Practice Question 3. Pass journal entries in the books of Hema for the following transactions:
(i) Hema’s acceptance to Nanda for ₹5,000 renewed for 3 months with interest at 10% p.a.
(ii) Nalini’s acceptance to Hema was for ₹10,000 was retired one month before due date at a discount of 12% p.a.

(iii) Discounted Natasha’s acceptance to Hema for ₹4,000 with the bank for ₹3,920
(iv) Neela requests Hema to renew her acceptance for ₹3,500 for 3 months. Hema accepted on the condition that
interest of ₹100 was paid in cash which Neela did.
(v) Received an acceptance from Geeta for ₹1,200 and it was endorsed to Seeta in full settlement of her claim of Rs
1300.

Answer:
Particulars L. Debit (₹) Credit (₹)
F
(i) Bills Payable A/c To, Dr. 5,000
Nanda’s A/c 5,000
(Being cancellation of Nanda’s bill for renewal)
Interest A/c Dr. 125
To, Nanda’s A/c 125
(Being interest due to Nanda)
Nanda’s A/c Dr. 5,125
To, Bills Payable A/c 5,125
(Being acceptance given for new bill)
(ii) Bank A/c Dr. 9,900
Discount A/c Dr. 100
To, Bills Receivable A/c 10,000
(Being Nalini’s acceptance retired at discount)
(iii) Bank A/c Dr. 3,920
Discount A/c Dr. 80
To, Bills Receivable A/c 4,000
(Being Natasha’s acceptance discounted)

(iv) Neela’s A/c Dr. 3,500

To, Bills Receivables A/c 3,500
(Being Neela’s acceptance cancelled for renewal)

Cash A/c Dr. 100

To, Interest A/c 100
(Being interest received from Neela in cash)
Bills Receivable A/c Dr. 3,500
To, Neela’s A/c 3,500
(Being Neela acceptance for new bill)
(v) Bills Receivable A/c Dr. 1,200
To, Geeta A/c 1,200
Geeta A/c Dr. 1,300
To, Bills Receivable A/c 1,200
To discount received 100

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Practice question 4: (Based on mutual accommodation)

For mutual accommodation of X and Y, X drew a bill for Rs. 60,000, Which was duly accepted by
Y. X discounted the bill with his bank @ 12% p.a. for 3 months and remitted 1/3rd of the proceeds
to Y. Just before due date, X remitted the balance amount to Y and Y met the bill on due date.
Make journal entries.
In the book of X In the book of Y
Bill receivable account Dr 60,000 X’s account Dr 60,000
To Y’s account 60,000 To Bill payable account 60,000
( being bill drawn) (Being bill accepted )
Bank account Dr 58,200
Discount account Dr 1,800 No entry
To Bill receivable account 60,000
(Being bill discounted)
Y’s account Dr 20,000 Cash account Dr 19,400
To Cash account 19,400 Discount account Dr 600
To Discount account 600 To X’s account 20,000
(Being 1/3 amount remitted)
Y’s account Dr 40,000 Cash account Dr 40,000
To cash account 40,000 To X’s account 40,000

No entry Bill payable account Dr 60,000

To Cash account 60,000

Practice question 5. (Based on mutual accommodation)

Bose and Mitra were in need of funds. On 1st May, 2024 Bose accepted Mitra’s draft for ₹6,000 at
3 months.
Mitra got it discounted at 6%p.a. and remitted 1/3 of the proceeds to Bose. On the due date Mitra
was not able to send the amount instead he accepted to Bose’s bill for ₹4,500 at two months. Bose
got it discounted for ₹4,420. Out of this ₹280 were sent to Mitra. Before the maturity of the
renewed bill, Mitra became insolvent and only 60% was realized from his estate. Give Journal
entries in the books of Bose and Mitra.

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Solution: Journal entries in the book of Bose and Mitra:

Date Mitra Bose
st
1 May Bills receivable account Dr 6,000 Mitra account Dr 6,000
To Bose account 6,000 To Bills payable account 6,000
(Being bill drawn)

4th May Bank account Dr 5,910

Discount account Dr 90 XXXX
To Bills receivable account 6,000
(Being bill discounted)

4th May Bose account Dr 2,000 Cash account Dr 1,970

To cash account 1,970 Discount account Dr 30
To discount account 30 To Mitra account 2,000
(Being 1/3 amount remitted)

3 Bose account Dr 4,500 Bills receivable account Dr 4,500

August To bills payable account 4,500 Mitra account 4,500
(Being new bill accepted) (Being new bill drawn)

Bank account Dr 4,420

XXXX Discount account Dr 80
To Bills receivable account 4,500

(Being new bill discounted)

Bills payable account DrTo 6,000
XXXX cash account 6,000
(Being first bill met)

4th Cash account Dr 280 Mitra account Dr To 357

August Discount account Dr To 77 Cash account 280
Bose account 357 To Discount account 77
(being cash remitted)

6th Oct Bills payable account Dr 4,500 Mitra account Dr 4,500

To Bose account 4,500 To Bank account 4,500

6th Oct Bose account Dr 4,357 Cash account Dr 2,614

To cash account 2,614 Bad debts account Dr 1,743
To deficiency account 1,743 To Mitra account 4,357
(Being final settlement made)
Practice question 6. Important for 1 mark question/ MCQ

1. Section 13(1) of the negotiable instrument act 1881 Definition of negotiable instrument
2. Section 5 of the negotiable instrument act 1881 Definition of bill of exchange
3. Drawer (Maker of bill) Creditor, lender or seller

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4. Drawee Debtor, Lendee or purchaser

5. Payee Beneficiary
6. Negotiable Transferable from one person to another.

Practice question 7. Important for 1 mark question/ MCQ

(i) in case of ‘after sight bill’ , period begins from the date of accepting the bill.

(ii) a bill is drawn on 14 July 2023 for two months. The bill is ‘after date bill’. The due date of bill will be 14th
September.

Note: if type of bill is not given is question, we always assume it after date bill and 3 days of grace period is
also included.

(iii) Noting charges are paid by the holder of bill on the due date but it is borne by the drawee of the bill.

(iv) in case of on demand bill/ at sight bill/ on presentation bill, no grace period is allowed.

(v) in case of Documentary bill, the bill of exchange is supported by the relevant documents that confirm
thegenuineness of sale or transaction that took place between the seller and buyer.

(vi) An Inland bill is payable only in one country and not in any other foreign country.

Practice question 8. Multiple choice questions:

1. The person other than the original creditor to whom the amount of the bill is made payable to is known
as the of the bill.

(a) Holder (b) Payee (c) Drawer (d) Endorser

2. Retirement of bill means:

(a) making payment before the due date

(b) Cancellation of the bill
(c) Sending the bill for collection
(d) Endorsing the bill in favour of third party.

3. At the time of retirement of a bill, the acceptor debits:

(a) Bills receivable account (b) Bill payable account (c) Discount (d) None of the
above

4. The party who is ordered to pay the amount is known as:

(a) Payee (b) Drawer (c) Drawee (d) Endorsee

5. At the time of dishonour of an endorsed bill which one of these accounts would be credited by the
drawee

(a) Bill payable account (b) Drawer (c) Bank (d) Bill dishonored account

6. Kuntal draws a bill on Shyam for ₹3,000. Kuntal endorsed it to Ram. Ram endorsed it to Rahim. The
payee of the bill will be:
(a) Kuntal (b) Ram (c) Shyam (d) Rahim

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7. On 1-8-23, X draws a bill on Y for 30 days after sight. The date of acceptance is 8-8-23. The due date of
the bill will be…

(a) 7-9-23 (b) 10-9-23 (c) 11-9-23 (d) 9-9-23

8. ‘Bill at sight’ means the instance at which…..

a) No time for payment is mentioned in the bill

b) The payment is to be made on demand at any time
c) The payment is made after a particular time
d) Both a & b

9. A draws a bill on 1/04/23 for 60,000 for 3 months. B accepted it 8/04/23. The bill was discounted on
8/05/23 @ 12% p.a. The amount of discount will be in case bill is after sight.

(a) ₹1,800 (b) ₹1,200 (c) ₹600 (d) ₹1,300

10. On 15.8.23 X draws a bill on Y for 3 months for ₹20,000. 18th Nov was a sudden holiday, due date of
the bill will be:
th th th
(a) 17th Nov (b) 18 Nov (c) 19 Nov (d) 15 Nov

11. On 16.6.23, X draws a bill on Y for ₹25,000 for 30 days. 19th July is a public holiday, due date of the bill
will be:

(a) 19th July (b) 18th July (c) 17th July (d) 16th July

12. A bill of ₹12,000 was discounted by A with the banker for ₹11,880. At maturity, the bill returned
dishonoured, noting charges ₹20. How much amount will the bank deduct from A's bank balance at
the time of such dishonour?

(a) ₹12,000 (b) ₹11,880 (c) ₹12,020 (d) ₹11,900

13. On 1.4.2023, X draws a bill on Y for ₹50,000 for 3 months. X got the bill discounted 4.4.2023 at
12% p.a rate. The amount of discount on bill will be:

(a) ₹1500 (b) ₹1600 (c) ₹1800 (d) ₹1450

14. Mr. A draws a bill on Mr. Y for ₹30,000 on 1.1.23 for 3 months. On 4.2.23. X got the bill discounted at
12% p.a.

The amount of discount will be:

(a) ₹900 (b) ₹600 (c) ₹300 (d) ₹650

15. X draws a bill on Y for ₹20,000 for 3 months on 1.1.23. The bill is discounted with banker at a charge of
₹100. At maturity the bill return dishonoured. Noting charges paid ₹300. In the books
of X, for dishonour, the bank account will be credited by:

(a) ₹19,900 (b) ₹20,200 (c) ₹20,100 (d) ₹20,300

16. On 1.1.23 X draws a bill on Y for ₹10,000 for the period of 3 months. At maturity Y request X to renew the
bill for 2 month at 12% p.a. Amount of interest will be:

(a) ₹200 (b) ₹300 (c) ₹500 (d) None

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17. On 1.6.23 X draw a bill on Y for ₹25,000. At maturity Y request X to accept ₹5,000 in cash and
noting charges incurred ₹100 and for the balance X draw a bill on Y for 2 months at 12% p.a. Interest amount will
be:

(a) ₹410 (b) ₹500 (c) ₹402 (d) ₹400

18. Ram draws on Aslam a bill for ₹60,000 on 1.4.23 for 2 months. Aslam accepts the bill and sends it to Ram
who gets it discounted for ₹58,800. Ram immediately remits ₹19,600 to Aslam. On
due date, Ram, being unable to remit the amount due, accepts a bill for ₹84,000 for 2 months which is
discounted by Aslam for ₹82,200. Aslam sends ₹14,800 to Ram out of the same. How much discount
will be borne by Ram at the time of ₹14,800 remittances?

(a) ₹1200 (b) ₹1800 (c) ₹1100 (d) ₹800

19. Mr Bobby sold goods worth ₹25,000 to Mr Bonny. Bonny immediately accepted a bill on 1.11.2023, payable
after 3 months. Bobby discounted this bill @ 18% p.a. on 1.12.2023. On the due date Bonny failed to discharge
the bill. Noting charges paid by the bank ₹1,000. Later on Bonny became insolvent and 50 paise is
recovered from Bonny’ s estate. How much amount of bad debt will be recorded in the books
of Bobby:

(a) ₹12,500 (b) ₹26,000 (c) ₹12,437.50 (d) ₹13,000

20. S draws 2 bills of exchange on 1.1.23 for ₹3,000 and ₹5,000 respectively. The bill of exchange for
₹3,000 is for 2 months, while the bill of exchange for ₹5,000 is for 3 months. These bills are accepted
by K. On 4.3.23. K requests S to renew the first bill with interest at 18% p.a. for a period of 2 months.
S agrees to this proposal. On 20.3.23 K retires the acceptance for ₹5,000 the interest rebate i.e.,
discount being ₹50.

Before the due date of the renewed bill K becomes insolvent and only 60 paise in a rupee can be
recovered from his estate. How much bad debt will be recorded in the books of S:

(a) ₹1,236 (b) ₹1,854 (c) ₹3,090 (d) ₹3,000

21. The promissory note should be signed by:

(a) drawer (b) drawee (c) payee (d) promisor

22. Kuntal draws a bill on Shyam for ₹3,000. Kuntal endorsed it to Ram. Ram endorsed it to Rahim.
The payee of the bill will be:

(a) Kuntal (b) Ram (c) Shyam (d) Rahim

23. Mr. Rex accepted a bill drawn by Mr. Rabin. Mr. Rabin endorsed the bill to Mr Shekar. On the due date, the bill
is dishonoured as Mr Rex became insolvent. To record the dishonour of the bill in the
books of Mr. Rabin, which of the following accounts should be credited?

(a) Mr. Rex's account (b) Bills Receivable account

(c) Mr Shekar's account (d) Bills payable account

24. For mutual accommodation of A and B, B accepted a bill drawn on him by A for 2 months Rs 6,000.
The said bill is discounted at 12% pa. and remitted l/3rd of the proceeds to B. The amount remitted by A to B will
be:

(a) 2000 (b) 1960 (c) 1920 (d) 1900

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25. A draws a bill on B for Rs 4,500 for mutual accommodation in the ratio 2:1. A got it discounted at 4,230
and remitted l/3rd of the proceeds to B. At the time of maturity, how much amount A should remit to B such
that B can pay off the bill?
(a) 3000 (b) 2880 (c) 2920 (d) 3010

26. Suman drew a bill on Sonu for Rs 4,500 for mutual accommodation in the ratio 2:1. Sonu accepted the bill
and returned to Suman. Suman discounted the bill for Rs 4,230 and remitted l/3rd proceeds
to Sonu. Before the due date, not having funds to meet the bill, Sonu drew a
bill on Suman for Rs 6,300 on the same terms as to mutual accommodation. The second bill was
discounted for Rs 6,120.

The first bill was honoured on the due date and a net amount of Rs 1,080 was remitted to Suman by Sonu.
The proportionate discount charge on both the bills is to be borne by Suman is:

(a) 180 (b) 150 (c) 300 (d) 120

27. which of the following instrument is not a negotiable instrument:

(a) Bearer cheque (b) Promissory note (c) Bill of exchange (d) Crossed cheque

28. On 1.1.23, Vikas draws a bill of exchange for Rs 10,000 due for payment after 3 months on Ekta. Ekta
accepts to this bill of exchange. On 4.3.23, Ekta retires the bill of exchange at a
discount of 12% p.a. Which of the discount is correct for premature payment
in the books of Ekta?

(a) 120 (b) 100 (c)140 (d) 160

29. Under which circumstances drawer and payee is same person:

(a) When drawer discounted the bill with banker

(b) When drawer endorse the bill to the third party
(c) When drawer held the bill till maturity
(d) When drawee rejects to accept the bill

30. Which of the following statement is true:

(a) Creditors can draw a bill on Debtors

(b) Debtors can draw a bill on Creditors.
(c) Bank will draw a bill on customer at the time of overdraft.
(d) One can draw the bill on another under any circumstances.

31. in case of ……….type of bill, the bill of exchange is supported by the relevant documents that confirm
thegenuineness of sale or transaction that took place between the seller and buyer.

(a) Documentary Bill

(b) Usance Bill

(c) Trade Bill

(d) Supply Bil

32. ……………………..bill is a time-bound bill which means the payment has to be made within the
given time period and time.

(a) Documentary Bill

(b) Usance Bill

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(c) Trade Bill

(d) Supply Bill

33. ……….. is payable only in one country and not in any other foreign country.

(a) Foreign Bill

(b) Trade Bill
(c) Inland Bill
(d) Clean Bill

34. ……… bill does not have any proof of a document, so the interest is comparatively higher than the other bills.

(a) Accommodation Bill

(b) Supply Bill
(c) Trade Bill
(d) Clean Bill

Answer:

1.b 2.a 3.b 4.c 5.b 6.d 7.a 8.d 9.b 10.c
11.b 12.c 13.a 14.b 15.d 16.a 17.d 18.a 19.d 20.b
21.a 22.d 23.a 24.b 25.a 26.c 27.d 28.b 29.c 30.a

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