Important Questions for CBSE Class 11 Accountancy Chapter 8 – Bill Of Exchange

Class 11 Accountancy Chapter 8 Bill of Exchange Important Questions 

Businesses sell goods and services for both cash and credit. When goods are sold for credit, the revenue for that sale might come later, but to give a surety, an instrument of credit is used to ensure that sales occur as per the agreed-upon conditions. Chapter 8 in Class 11 Accountancy deals with this credit instrument known as the bill of exchange. Bill of Exchange is an essential chapter in the Class 11 curriculum that will help students understand the meaning of the bill of exchange and promissory note, the different terminologies involved, and the recording of transactions relating to dishonor, renewal, and retirement of the bill of exchange. To be thorough with the chapter’s concepts, students can go through the Important Questions Class 11 Accountancy Chapter 8 provided by Extramarks.

Lakhs of students across the country use Extramarks as a reliable source to study for their examination preparation. Students get access to expert-answered solutions along with NCERT solutions, reference books, and CBSE sample papers, all of which help the students stay in the practice of solving the questions. The list is made strictly following the CBSE guidelines, so the Important Questions Class 11 Accountancy Chapter 8 is a great resource that will help students gain confidence in the Bill of Exchange which is considered essential from an examination point of view. 

At Extramarks, you can easily access NCERT books, NCERT solutions, CBSE past years’ papers, reference books, etc., alongside the Important Questions Class 11 Accountancy Chapter 8 so that students can have a holistic study session and ace their upcoming examinations.

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CBSE Class 11 Accountancy Important Questions
Sr No. Chapters Chapters Name
1 Chapter 1 Introduction to Accounting
2 Chapter 2 Theory Base of Accounting
3 Chapter 3 Recording of Transactions – 1
4 Chapter 4 Recording of Transactions II (Financial Accounting – I)
5 Chapter 5 Bank Reconciliation Statement
6 Chapter 6 Trial Balance and Rectification of Errors
7 Chapter 7 Depreciation, Provisions & Reserves
8 Chapter 8 Bill of Exchange
9 Chapter 9 Financial Statements – 1
10 Chapter 10 Financial Statements 2
11 Chapter 11 Accounts from Incomplete Records
12 Chapter 12 Applications of Computers in Accounting
13 Chapter 13 Computerised Accounting System

Important Questions of Bills of Exchange Class 11 with Solutions

Bill of Exchange is a chapter that can be aced with a bit of practice and hard work by students. Chapter 8 Class 11 Accountancy Important Questions is a valuable resource that students can use along with their study plan to clarify essential aspects and gain confidence in solving numerical questions.

Here is a list of solved Important Questions Class 11 Accountancy Chapter 8:

Question 1. On whom the trade bill is drawn:

  1. Seller
  2. Creditor
  3. Debtor
  4. Owner

Answer 1: c) Debtor

Explanation: A trade bill is a bill of exchange that is drawn and accepted to settle a trading transaction. The buyer agrees with this bill of trade that the seller has drawn.

Question 2. The party entitled to receive the cash of a bill receivable is known as:

  1. Drawer
  2. Drawee
  3. Capitalist
  4. Bank

Answer 2: a) Drawer 

Explanation: The Drawer of the bill is the seller of the goods; hence the party that receives the payment of a bill receivable is the Drawer.

Question 3. Write ‘True’ or ‘False’ for the following

  1. The creditor draws the bill of exchange
  2. A payee must accept the bill of exchange
  3. A time bill is a bill payable on demand
  4. All cash transactions are drawn in a bill of exchange

Answer 3:

  1. True 
  2. False
  3. False 
  4. False

Question 4. Write two points of distinction between bills of exchange and promissory notes.

Answer 4: 

Basis of Difference Bills of Exchange Promissory Note
Drawer A creditor draws bills of exchange A debtor draws a promissory note
Parties Involved There are three parties involved, namely;

  • Drawer
  • Drawee
  • Payee
 There are two parties involved, namely;

  • Maker/Drawer
  • Payee

Question 5. What do you understand by the endorsement of the bill?

Answer 5: Transferring the bill of exchange to any other person is an endorsement of the bill. The Drawer of the bill can put their signatures, along with the name of the party being endorsed, at the back of the bill for initial endorsement. 

At the time of negotiation, if the transfer is prohibited, then the Drawer of the bill cannot endorse it.

Question 6. What are the advantages of a promissory note?

Answer 6: There are multiple benefits of a promissory note, some of which are as below:

  1. A company can utilize A promissory note to borrow money even if it does not have a strong credit rating.
  2. When borrowing money, it can be used as a guarantee of payback.
  3. There are two types of promissory notes: secured and unsecured.
  4. Additionally, it supports monthly, quarterly, half-yearly, or annual installment payments.
  5. A promissory note offers a higher interest rate than a bank deposit.
  6. A secured promissory note carries a lesser risk than an unsecured one.

Question 7. Briefly explain the effect of dishonor and noting of a bill of exchange.

Answer 7: Dishonour of a bill of exchange occurs when the drawee of the bill cannot make the complete payment by the bill’s maturity date. As a result, the acceptor’s liability is resumed, and they once more become a debtor. The company reverses the bill of exchange receipt to reflect the corrections.

Entries which will be made in books of holder/drawer (Non-payment of noting charges):

Drawee A/c Dr.
To Bills Receivable A/c
(Bill of exchange dishonoured)

Entry in the books of drawee:

Bills Payable A/c Dr.
To Drawer
(Bill of exchange dishonored)

A notary public charges a fee for maintaining documentation of a dishonored bill. The bill’s drawee is responsible for paying these fees.

The notary public makes a note of the information below.

  1. The bill’s total and due date
  2. Potential Cause of Bill Dishonor
  3. Fee charges for Noting

Question 8. On January 01, 2017, Harsh accepted a monthly bill for ₹ 10,000 drawn on him by Tanu for the latter’s benefit. Tanu discounted the bill on the same day @ 8% p.a. At the due date, Tanu sent a cheque to Harsh to honor the bill. Harsh duly honored his acceptance. 

Record journal entries in the Books of Harsh and Tanu.

Answer 8: 

Books of Tanu Journal
Date Particulars L.F. Debit ₹ Credit₹
2017
Jan 01 Bills Receivable A/c Dr. 10,000
To Harsh 10,000
(Harsh’s acceptance received)
Jan 01 Bank A/c Dr. 9,933
Discount A/c 67
To Bills Receivable A/c 10,000
(Harsh’s acceptance is discounted @ 8% p.a.

for one month)
Feb 04 Harsha Dr. 10,000
To Bank A/c 10,000
(Harsh’s account was settled by paying the amount through cheque)

 

Books of Harsh Journal
Date Particulars L.F. Debit ₹ Credit₹
2017
Jan 01 Tanu Dr. 10,000
To Bills Payable A/c 10,000
(Bill drawn by Tanu accepted)
Feb 04 Bank A/c Dr. 10,000
To Tanu 10,000
(Cheque received from Tanu)
Feb 04 Bills Payable A/c Dr. 10,000
To Bank A/c 10,000
(Bill drawn by Tanu met on due date)

Question 9. Ramesh holds a note of $6,500 with an interest rate of 11% annually. The note was issued on March 19, 2019, and is due November 14, 2019. He sells the note to Rajesh on June 12 at a discount rate of 10% annually. Calculate the proceeds on the third-party discount note.

Answer 9:

The amount of note is $6,500

Interest rate 11% 

Discount rate = 10% 

Time 152/360  

                                                               Proceed on the note= 

                                                              = Note – (Note*Discount rate*time) 

                                                              = 6500 – [6500*0.1* 152/360]

                                                              = 6,225.55            

The proceeds on the third-party discount note will be 6,225.55.

Lilly sold goods to Mathew on 1.3.2017 for ₹ 12,000 and then drew upon him a bill of exchange for the same amount payable after two months. Lilly immediately discounted the bill with her bank at 9% p.a. The bill’s maturity date was a non-business day (holiday); therefore, Lilly had to present the bill as per the provisions of the Indian Instruments Act., of 1881. Mathew dishonored the bill, and Lilly paid ₹ 45 as noting charges. Mathew settled his claim against Lilly five days after the dishonor of the bill by cheque, which includes interest @ 12% for the term of the bill. Journalize the above transactions in the books of Lilly and Mathew and prepare Mathew’s account in the books of Lilly and Lilly’s account in the books of Mathew.

Answer 10: 

Books of Lilly Journal
Date Particulars L.F. Debit ₹ Credit₹
2017
Mar 01 Mathew Dr. 12,000
To Sales A/c 12,000
(Goods traded to Mathew)
Mar 01 Bills Receivable A/c Dr. 12,000
To Mathew 12,000
(Mathew’s acceptance payable after two months received)
Mar 01 Bank A/c Dr. 11,820
Discount A/c Dr. 180
To Bills Receivable A/c 12,000
(Mathew’s bill was discounted at 9% p.a.)
May 03 Mathew A/c Dr. 12,045
To Bank A/c 12,045
(Mathew’s acceptance was dishonoured & bank paid ₹ 45 as noting charges)
May 08 Mathew Dr. 241
To Interest A/c 241
(Interest @ 12% was credited to Mathew on account of bill dishonoured)
May 08 Bank A/c Dr. 12,286
To Mathew 12,286
(Cheque received from Mathew for the amount due from him)

Note: In the above question, May 04 was considered a Holiday, so the maturity will be May 03 2017, in place of May 04, 2017.

Ledger
Mathew’s Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount ₹
2017 2017
Mar 01 Sales 12,000 Mar 01 Bills Receivable 12,000
May 03 Bank 12,045 May 08 Bank 12,286
May 08 Interest 241
24,286 24,286

 

Books of Mathew Journal
Date Particulars L.F. Debit ₹ Credit₹
2017
Mar 01 Purchases A/c Dr. 12,000
To Lilly 12,000
(Goods purchased from Lilly)
Mar 01 Lilly Dr. 12,000
To Bills Payable A/c 12,000
(Lilly’s acceptance payable after two months accepted)
May 03 Bills Payable A/c Dr. 12,000
Noting Charges A/c Dr. 45
To Lilly 12,045
(Bill drawn by Lilly dishonoured)
May 08 Interest A/c Dr. 241
To Lilly 241
(Interest charged @ 12% from Lilly on account of bill dishonoured)
May 08 Lilly Dr. 12,286
To Bank A/c 12,286
(Amount paid to Lilly through cheque)

 

Ledger
Lilly’s Account
Dr. Cr.
Date Particulars J.F. Amount ₹ Date Particulars J.F. Amount ₹
2017 2017
Mar 01 Bills Payable 12,000 Mar 01 Purchases 12,000
May 09 Bank 12,286 May 03 Bills Payable 12,000
May 03 Noting charges 45
May 08 Interest 241
24,286 24,286

Benefits of Solving Bills of Exchange Class 11 Important Questions

The chapter on the Bill of Exchange contains essential and relevant topics that can help students understand how business transactions occur in real-world situations. From an examination point of view, Chapter 8 covers crucial topics, which can help students gain good grades. Thus going through the Important Questions Class 11 Accountancy Chapter 8 provided by Extramarks is a great way to incorporate practicing questions for foolproof exam preparation.

Some of the benefits the students can gain from Class 11 Accountancy Chapter 8 Important Questions are as follows:

  • The practice of questions that have a higher chance of appearing in examinations will help the students gain good marks.
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  • Step-by-step solutions provided by subject experts help students easily understand the entire chapter.
  • The Important Questions Class 11 Accountancy Chapter 8 list is created by covering the essential topics within the chapter; hence revising them helps in the revision of the entire chapter.

High-quality resources are available on Extramarks, including NCERT textbooks, NCERT study guides, CBSE practice tests, CBSE past years’ exam papers, CBSE extra questions, and CBSE mock exams. Apart from the Important Questions Class 11 Accountancy Chapter 8, students can click on the URLs listed below to access these resources:

  • NCERT books
  • CBSE Revision Notes
  • CBSE syllabus
  • CBSE sample papers
  • CBSE past years’ question papers
  • Important formulas 
  • CBSE extra questions

Q.1 What is the meaning of dishonour of a bill

Marks:1
Ans

A bill is said to have been dishonoured when the drawee fails to make the payment of the bill on the date of maturity.

Q.2 On 1ST October, 2021, X sells goods to Y for 25,000 and draws two bills of exchange on him: the first for 10,000 for 2months and second for 15,000 for 3 months. Y accepts and returns these bills to X. Both the bills are sent to bank for collection. In the due course, X receives the information from the bank that bill for 10,000 has been duly met and the other bill for 15,000 has been dishonoured. Noting charges are paid on the dishonour of the second bill are 100.

Pass Journal entries in the books of X.

Marks:4
Ans

Books of X
Journal Entries
Date Particulars LF Dr. () Cr.()
2021 Y A/c Dr 25,000
Oct1 To Sales A/c 25,000
(Being goods sold to Y on credit)
Oct1 Bills Receivable (BR1) A/c Dr 10,000
Bills Receivable (BR2) A/c Dr 15,000
To Y 25,000
(Being two bills accepted by Y)
Oct1 Bills sent for collection A/c Dr 2,5000
To Bills Receivable(BR1) A/c 10,000
To Bills Receivable (BR2) A/c 15,000
(Being bill sent to bank for collection)
Dec 4 Bank A/c Dr 10,000
To Bills sent for collection A/c 10,000
(Being amount collected by bank)
2022 Y A/c Dr 15,100
Jan 4 To Bills sent for collection A/c 15,000
To Bank A/c 100
(Being the bill sent for collection, now dishonoured)

Q.3 On January 01, 2021, Mathew sold goods for 10,400 to Darren and drew a three months after date bill. Darren accepted the bill and returned it to Mathew on May 05, 2021. Mathew endorsed the bill to Jack in the full settlement of the amount due to Jack of 10,600. On the due date, the bill became dishonored. Jack paid 100 as noting charges.

Pass the necessary journal entries in the books of all three parties Mathew, Darren and Jack.

Marks:6
Ans

In the books of Mathew

Date Particulars L.F Amount Dr. Amount Cr.
2021
May 1 Darren Dr. 10,400
To sales a/c 10,400
(Goods sold to Darren)
May 5 Bills receivable a/c Dr. 10,400
To Darren 10,400
(Darren’s acceptance received for three months)
May 5 Jack Dr. 10,600
To bills receivable a/c 10,400
To discount received a/c 200
(Darren’s acceptance endorsed to Jack and discount received for Rs. 200)
Aug 4 Darren Dr. 10,500
Discount received a/c 200
To Jack 10,700
(Darren’s acceptance dishonored and Jack paid Rs. 100 as noting charges

In the books of Darren

Date Particulars L.F Amount Dr. Amount Cr.
2021
May 1 Purchases a/c Dr. 10,400
To Mathew 10,400
(Goods bought from Mathew)
May 1 Mathew Dr. 10,400
To bills payable a/c 10,400
(bill drawn by Mathew for three months accepted)
Aug 4 Bills payable a/c Dr. 10,400
Noting charges a/c Dr. 100
To Mathew 10,500
(bill drawn by Mathew got dishonored and noting charges Rs. 100)

In the books of Jack

Date Particulars L.F Amount Dr. Amount Cr.
2021
May 5 Bills receivable a/c Dr. 10,400
Discount allowed a/c Dr. 200
To Mathew 10,600
(bill received from Mathew and allowed him discount of Rs. 200)
Aug 4 Mathew Dr. 10,700
To bills receivable a/c 10,400
To discount allowed a/c 200
To cash a/c 100
(bill received from Mathew dishonored and Rs. 100 paid as noting charges)

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CBSE Class 11 Accountancy Important Questions

Chapter 1 - Introduction to Accounting

Chapter 2 - Theory Base of Accounting

Chapter 3 - Recording of Transactions – 1

Chapter 4 - Recording of Transactions II (Financial Accounting – I)

Chapter 5 - Bank Reconciliation Statement

Chapter 6 - Trial Balance and Rectification of Errors

Chapter 7 - Depreciation, Provisions & Reserves

Chapter 9 - Financial Statements – 1

Chapter 10 - Financial Statements 2

Chapter 11 - Accounts from Incomplete Records

Chapter 12 - Applications of Computers in Accounting

Chapter 13 - Computerised Accounting System

FAQs (Frequently Asked Questions)

The following list of topics in the chapter on the Bill of Exchange are:

  • Meaning of Bill of Exchange
  • Parties to a Bill of Exchange
  • Promissory Note
  • Parties to a Promissory Note
  • Advantages of Bill of Exchange
  • Maturity of Bill
  • Discounting of Bill
  • Endorsement of Bill
  • Accounting Treatment in the Books of Acceptor/Promissory

While the chapter might appear different at first but with a little bit of practice, Chapter 8 of Bill can be an easy chapter to study in Class 11 Accountancy. Students need to understand the basic concepts for which they can refer to NCERT books and some reference books. For practicing numerical problems, students can significantly benefit from referring to sources such as CBSE past years’ papers, CBSE sample papers, and Important Questions Class 11 Accountancy Chapter 8.