Balbharati solutions for Book-keeping and Accountancy 12th Standard HSC Maharashtra State Board
Chapter 7 - Bills of Exchange [Latest edition]
Select the correct option and rewrite the sentence:-
The person on whom a bill is drawn is called a________________.
Before acceptance the bill is called a________________.
When the due date of bill drawn falls due on a public holiday, the payment must be made on the_____________ day.
The due date of the bill drawn for 2 months on 23rd Nov. 2019 will be______________.
Noting charges are borne by__________________.
There are _______________ parties to bill of exchange.
When a bill is drawn for 2 months after date on 3rd Jan. 2020, its due date will be__________________.
Notary Public is_________________.
When Acceptor or Drawee does not pay the amount of bill to the holder on the due date it is known as_____________ the bill.
The person who accepts the bill treats the bill as___________.
Give one word/phrase/term which can substitute the following statement:-
State True or False with reason:-
Inland bill is one which is drawn in one country and payable in another country. - False.
Reason
Inland bill means, a bill drawn, accepted, and made payable within the territory of one and the same, country. So, a bill is drawn in one country and payable in another country can’t be a inland bill.
Retirement of bill means payment of the bill before due date. - True
Reason
Payment of the bill, by the acceptor of the bill to the holder of the bill before the due date, is known as Retirement of the bill. So retirement of the bill means payment of the bill before the due date.
Drawee can transfer the ownership of the bill. - False
Reason
Drawee is a debtor. He has to pay the amount of the bill to its holder on the due date. Hence he cannot transfer its ownership to another person. Drawer can transfer the ownership of the bill as he is the owner of the bill.
Acceptance of bills without making any changes in the terms of the bill is called qualified acceptance. - False.
Reason
Acceptance of the bill with some changes as regards the terms, amount, place, etc. of a bill is known as qualified acceptance. Acceptance of the bill without making changes as regards the term is called general acceptance.
Discounting is a device to convert the bill into its present value. - True.
Reason
When the drawer or holder of the bill approaches the bank to discount the bill, the bank pays the bill amount after deducting a certain amount (which is known as discounting charges). It means the conversion of the bill into its present value in cash. So, we can say that discounting is a device to convert the bill into its present value.
A bill of exchange must be presented to the acceptor on the due date. - True.
Reason
To get the payment of the bill from the acceptor, the holder of the bill is required to present it to the acceptor on its due date. Acceptor either honours the bill or dishonours the bill.
If a bill is discounted by the holder, no entry is passed in his book when the bill is honoured on the due date. - True.
Reason
On discounting the bill the holder gives the possession of the bill to the bank. On the maturity date, the bank has to present the bill to the drawee to collect the payment. When discounted bill is honoured, the transaction takes place between drawee and bank.
Noting charges are to be borne by the drawer. - False.
Reason
Noting charges are to be borne by the drawee only as due to his act of non-payment, the bill is dishonoured and the drawer is not able to get money on its due date.
If a bill is drawn payable ‘on-demand’ no grace days are allowed. - True.
Reason
‘On-demand’ means the amount of the bill is to be paid by drawee immediately on presentation of the bill as no time period is mentioned on it. In demand bill 3 days grace are not allowed by law.
There are three parties to a promissory note. - False
Reason
There are only two parties to a promissory note, i.e. Drawer or maker of the note and drawee or payee of the note.
Find the odd one:-
- Retaining
- Noting
- Discounting
- Endorsing
- Trade bill
- Accommodation bill
- After date bill
- Demand bill
- Notary Public
- Drawer
- Drawee
- Payee
- Discounting charges
- Rebate
- Bank charges
- Noting charges.
- Stamp
- Acceptance
- Draft
- Amount
Complete the sentence:-
Answer in sentence: -
What do you mean by bill of exchange?
A Bill of Exchange is a written order signed by the drawer, directing to a certain person to pay a certain sum of money on-demand or on a certain future date to a certain person or as per his order.
What are days of grace?
The three extra days allowed to the drawee or the acceptor of a bill for making payment on it are called Days of Grace.
What do you mean by discounting a bill of exchange?
Encashment of a bill of exchange with the bank for certain cash which is less than the face value of the bill, before its due date by its drawer or holder is called Discounting of a Bill of Exchange.
What is noting of the bill?
Noting of a Bill of Exchange is the recording the facts of its dishonour by a Notary public.
What are noting charges?
Noting Charges are the fees charged by the Notary public for noting the facts of dishonour on the face of the bill and in his official register.
What is relationship between Drawer and Drawee?
The relationship between the drawer and the drawee is that of the creditor and debtor.
Who is payee of the bill?
The Payee of a Bill is the person to whom the bill is made payable or in whose favour the bill is drawn.
What do you mean by rebate?
Any concession or discount in monetary terms given by the holder of the bill of exchange to the drawee or acceptor, when a bill is retired is called Rebate.
What is legal due date?
Date which is arrived at after adding three days of grace to nominal due date is known as Legal Due Date.
What is bills payable on demand?
When amount of bill is payable by a drawee on the presentation of a bill, in which time period is not mentioned and grace days are not allowed is known as Bills Payable on Demand.
Do you agree or disagree with the following statement : -
Calculation:-
Ganesh draws a bill for ₹ 40,260 on 15th Jan. 2020 for 50 days. He discounted the bill with Bank of India @15% p.a. on the same day. Calculate the amount of discount.
Solution:
Discount = Amount of Bill × (Rate/100) × (Unexpired days/366)
∴ Discount = 40260 × (15/100) × (50/366)
∴ Discount = ₹ 825
(Note: 2020 is a Leap year, so total number of days = 366 days)
Shefali Traders drew a bill on Maya for ₹ 30,000 on 1st Oct. 2019 payable after 3 months. Calculate amount of discount in the following cases:
i) Shefali Traders discounted the bill on the same day @ 12% p.a.
ii) Shefali Traders discounted the bill on 1st Nov. 2019 @ 12% p.a.
iii) Shefali Traders discounted the bill on 1st Dec. 2019 @ 12% p.a.
Solution:
Discount = Amount of Bill × (Rate/100) × (Unexpired period in months / 12)
(i) Discount = 30000 × (12/100) × (3/12) = ₹ 900
(ii) Discount = 30000 × (12/100) × (2/12) = ₹ 600
(iii) Discount = 30000 × (12/100) × (1/12) = ₹ 300
Veena who had accepted Sudha’s bill for ₹ 28,000 was declared bankrupt and only 35 paise in a rupee could be recovered from her estate. Calculate the amount of bad debts.
Solution:
From Veena, only 35 paise in a rupee could be recovered i.e. 65 paise in a rupee is bad debts for Sudha.
So, Bad Debts = (100 - 35)% of Bill Amount = 65% of ₹ 28,000
Bad Debts = (65/100) × 28000 = ₹ 18,200
Therefore, the amount of bad debts is ₹ 18,200.
Nitin renewed his acceptance for ₹ 72,000 by paying ₹ 22,000 in cash and accepting a new bill for the balance plus interest @ 18% p.a. for 4 months. Calculate the amount of new bill.
Solution:
Total outstanding amount: ₹ 72,000
Cash paid: ₹ 22,000
Remaining dues (Balance for new bill before interest): ₹ 72,000 - ₹ 22,000 = ₹ 50,000
Interest Calculation:
Interest = (Principal × Rate × Time) / 100
Interest = (50,000 × 18 × 4/12) / 100
Interest = (50,000 × 18 × 1/3) / 100
Interest = 500 × 18 × 1/3 = 500 × 6 = ₹ 3,000
Amount of new bill = Remaining dues + Interest
Amount of new bill = ₹ 50,000 + ₹ 3,000 = ₹ 53,000
Nisha’s acceptance for ₹ 16,850 sent to bank for collection was honoured and bank charges debited were ₹ 125. Find out the amount actually received by Drawer.
Solution:
Amount of bill honoured: ₹ 16,850
Bank charges debited: ₹ 125
Amount actually received by Drawer = Amount of bill honoured - Bank charges
Amount actually received by Drawer = ₹ 16,850 - ₹ 125 = ₹ 16,725
A bill of ₹16,000 was drawn by Keshav on Gopal on 12th June 2019 for 2 months. What will be the due date, if all of sudden, the legal due date is declared as an emergency holiday?
Solution:
Date of drawing: 12th June 2019
Period of bill: 2 months
Nominal Due Date = 12th June 2019 + 2 months = 12th August 2019
Days of Grace = 3 days
Legal Due Date = 12th August 2019 + 3 days = 15th August 2019
If the legal due date (15th August 2019) is declared as an emergency holiday, the payment must be made on the next working day.
Therefore, the due date will be 16th August 2019 (assuming 16th August is a working day).
(Note: If 15th August was a pre-declared public holiday, the due date would be the preceding day, 14th August. However, for an emergency holiday declared suddenly on the due date, it shifts to the next working day.)
Prepare a bill of exchange from the following information:
Drawer: Shankar, Vadodara, Gujrat.
Drawee: Vinayak, Somwar peth, Pune.
Amount : ₹ 16,000
Period : 3 months
Date of Bill: 6th Sept. 2019.
Date of acceptance: 11th Sept. 2019.
View Solution
Drawer: Dinesh, P. R. Road, Andheri West.
Drawee: Mahesh, L. B. S. Road, Mulund.
Payee: Amit, Thane West.
Amount: ₹ 9,500
Period of Bill: 4 months after sight.
Date of Bill: 26th Nov. 2019.
Date of acceptance: 29th Nov. 2019.
View Solution
Prepare a bill of exchange from the following information
Kantilal, 343/D, Palm Heights, Jogeshwari, drew a bill on 10th Oct. 2019 for ₹63,490 for 45 days after date on Shantilal, B2, Himalaya Towers, Baramati, payable to Priyanka, Satara. The bill was accepted on 13th Oct. 2019 for 60 days.
Prepare a format of bill of exchange from the above details.
View Solution
Prepare a format of bill of exchange from the above details
Rahul Sane, 86-D, Raviwar Peth, Nagpur accepted the bill drawn on him by Prithviraj, Icon Heights, Wardha for ₹ 87,000 on 30th July 2019. The bill was drawn on 26th July 2019 for ₹ 1,00,000 for 90 days after date.
Prepare a format of bill of exchange from the following details:
View Solution
Drawer: Kashmira Shah, Partner M/S Shah and Shah, 2-C, Matruchaya Building, Akola. Drawee: Dhanashree Traders, Bangalore Road, Belgaum. (Signed by Jayashree, Partner) Payee: M/S Janki Traders, Akola.
Amount : ₹ 64,500
Period of Bill : 3 months
Date of drawing: 12th Sept. 2019
Date of acceptance: 15th Sept. 2019
Prepare a format of bill of exchange from the following.
View Solution
Prepare a demand bill with imaginary Drawer, Drawee, Address, Amount, and Date.
View Solution
Exercise - 7 | Q 1 | Page 305
Complete the following Table
| Date of Drawing | Date of Acceptance | Payable | Due Date |
|---|---|---|---|
| 30.1.2019 | 1.2.2019 | 60 days after date | |
| 17.8.2019 | 21.8.2019 | 3 months after sight | |
| 23.12.2019 | 26.12.2019 | 1 months after date | |
| 28.1.2019 | 28.1.2020 | 1 months after date | |
| 30.6.2019 | 2.7.2019 | 45 days after date |
Solution:
| Date of Drawing | Date of Acceptance | Payable | Due Date |
|---|---|---|---|
| 30.1.2019 | 1.2.2019 | 60 days after date | 3rd April 2019 |
| 17.8.2019 | 21.8.2019 | 3 months after sight | 24th Nov. 2019 |
| 23.12.2019 | 26.12.2019 | 1 months after date | 25th Jan. 2020 |
| 28.1.2019 | 28.1.2020 | 1 months after date | 3rd Mar. 2019 |
| 30.6.2019 | 2.7.2019 | 45 days after date | 17th Aug. 2019 |
Exercise - 7 | Q 2 | Page 305
Complete the following Table
| Sr. No | Date of drawing | Date of acceptance | Tenure | Type | Nominal due date | Legal due date |
|---|---|---|---|---|---|---|
| 1 | 3rd January 2020 | 5th January 2020 | 45 days | after date | ? | ? |
| 2 | 9th April 2019 | 12th April 2019 | 4 months | After sight | ? | ? |
| 3 | 23rd November 2019 | 23rd November 2019 | 2 months | after date | ? | ? |
| 4 | 16th August 2019 | 20th August 2019 | 4 months | After sight | ? | ? |
| 5 | 23rd December 2018 | 24th December 2018 | 60 days | after date | ? | ? |
Solution:
| Sr. No | Date of drawing | Date of acceptance | Tenure | Type | Nominal due date | Legal due date |
|---|---|---|---|---|---|---|
| 1 | 3rd January 2020 | 5th January 2020 | 45 days | after date | 17th Feb. 2020 | 20th Feb. 2020 |
| 2 | 9th April 2019 | 12th April 2019 | 4 months | After sight | 12th Aug. 2019 | 15th Aug. 2019 |
| 3 | 23rd November 2019 | 23rd November 2019 | 2 months | after date | 23rd Jan. 2020 | 25th Jan. 2020 |
| 4 | 16th August 2019 | 20th August 2019 | 4 months | After sight | 20th Dec. 2019 | 23rd Dec. 2019 |
| 5 | 23rd December 2018 | 24th December 2018 | 60 days | after date | 21st Feb. 2019 | 24th Feb. 2019 |
[7] Bills of Exchange - Practical problem - (Balbharati Book Keeping and Accountancy 12th Board Exam)
On 1st Jan. 2020 Hemant sold goods of ₹ 18,500 to Nitin. On the same date, Hemant drew a bill of exchange for ₹ 18,500 at 2 months. On the due date, the bill was duly honoured.
Give Journal Entries in the Books of Hemant and Nitin. Prepare Hemant’s account in the books of Nitin.
Solution:
In the books of Hemant
Journal Entries
| Date | Particulars | L.F | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| 2020 Jan. 1 | Nitin’s A/c Dr | 18,500 | ||
| To Sales A/c | 18,500 | |||
| (Being goods sold on credit) | ||||
| 2020 Jan. 1 | Bills Receivable A/c Dr | 18,500 | ||
| To Nitin’s A/c | 18,500 | |||
| (Being bill drawn and acceptance received from Nitin) | ||||
| 2020 Mar. 4 | Cash / Bank A/c Dr | 18,500 | ||
| To Bills Receivable A/c | 18,500 | |||
| (Being Nitin’s acceptance honoured on the due date) | ||||
| Total | 55,500 | 55,500 | ||
In the books of Nitin
Journal Entries
| Date | Particulars | L.F | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| 2020 Jan. 1 | Purchase A/c Dr | 18,500 | ||
| To Hemant’s A/c | 18,500 | |||
| (Being goods purchased on credit) | ||||
| 2020 Jan. 1 | Hemant’s A/c Dr | 18,500 | ||
| To Bills Payable A/c | 18,500 | |||
| (Being our acceptance is given) | ||||
| 2020 Mar. 4 | Bills Payable A/c Dr | 18,500 | ||
| To Cash / Bank A/c | 18,500 | |||
| (Being our acceptance honoured on due date) | ||||
| Total | 55,500 | 55,500 | ||
In the books of Nitin.
Hemant’s Account
| Date | Particulars | J.F | Amount (₹) | Date | Particulars | J.F | Amount (₹) |
|---|---|---|---|---|---|---|---|
| 2020 Jan. 1 | To Bills Payable A/c | 18,500 | 2020 Jan. 1 | By Purchase A/c | 18,500 | ||
| 18,500 | 18,500 |
[To get Remaining practical problem solutions Click Here]
Difficult Words and Their Meanings:
- Bill of Exchange
- A written order from one person (drawer) to another (drawee) to pay a specific sum of money to a third person (payee) or to the order of the payee, either on demand or at a future date.
- Drawer
- The person who makes or writes the bill of exchange; typically the seller or creditor.
- Drawee
- The person on whom the bill of exchange is drawn and who is directed to pay; typically the buyer or debtor.
- Payee
- The person to whom the amount of the bill is payable.
- Acceptor
- The drawee after they have signed the bill, thereby agreeing to pay the amount specified.
- Draft
- A bill of exchange before it is accepted by the drawee.
- Due Date (Maturity Date)
- The date on which the payment of the bill becomes due.
- Days of Grace
- Extra days (usually three) allowed by law to the drawee for making payment after the nominal due date.
- Honouring a Bill
- When the acceptor pays the amount of the bill on the due date.
- Dishonouring a Bill
- When the acceptor fails to make payment of the bill on the due date.
- Noting Charges
- Fees paid to a Notary Public for officially recording the fact that a bill has been dishonoured.
- Notary Public
- A government-appointed official who can certify documents and attest to the dishonour of a bill.
- Discounting a Bill
- Encashing the bill with a bank before its due date for an amount less than its face value (the difference being the discount charged by the bank).
- Endorsement
- The act of signing the bill (usually on the back) to transfer its ownership to another person.
- Endorser
- The person who endorses (transfers) the bill to someone else.
- Endorsee
- The person to whom the bill is endorsed (transferred).
- Retirement of a Bill
- Payment of a bill by the drawee before its due date, often for a discount (rebate).
- Renewal of a Bill
- Cancellation of an old bill and drawing a new bill for an extended period, often including interest for the extended credit.
- Accommodation Bill
- A bill drawn and accepted without any underlying trade transaction or consideration, solely to provide financial help to one or more parties.
- Inland Bill
- A bill drawn and payable within the same country, or drawn on a person resident in the same country.
- Foreign Bill
- A bill that is not an inland bill (e.g., drawn in one country and payable in another).
- Bills Receivable
- An asset for the drawer/holder, representing money to be received.
- Bills Payable
- A liability for the drawee/acceptor, representing money to be paid.
- Insolvency
- The state of being unable to pay debts owed.
- Bad Debts
- An amount owed that is considered uncollectible and is written off.
- Rebate
- A discount or reduction given, often for early payment (like in retirement of a bill).
- Tenure (Term)
- The period for which a bill of exchange is drawn.
- After Date Bill
- A bill where the due date is calculated from the date of drawing.
- After Sight Bill
- A bill where the due date is calculated from the date of acceptance.
- On Demand Bill (Sight Bill)
- A bill payable immediately upon presentation to the drawee; no grace days are allowed.
