FINPREP Practice Problems Chapter Name Bills of exchange & Goods on approval or return basic Chapter No.

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FINPREP Practice Problems Chapter Name Bills of exchange & Goods on approval or return basic Chapter No. 9

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FINPREP Practice Problems Chapter Name Bills of exchange & Goods on approval or return basic Chapter No. 9 Bills of Exchange

7.3.1. Introduction 1. A bill given to a creditor is called ___________ a) Bills Receivable b) Bills Payable c) Purchase Invoice d) Sales Invoice 7.3.2. Promissory note (P/N) 2. A Promissory Note is ______ a) A conditional promise to pay b) An unconditional promise to pay c) A conditional order to pay d) An unconditional order to pay 3. From the following information, find out who can draw the bill if Mr. A sold goods to B: a) A will draw a bill on B b) B will draw a bill on A c) None d) Third party will draw a bill on A 4. The Promissory Note should be signed by: a) Drawer b) Drawee c) Payee d) Promissor 7.3.3. Bills of Exchange (B/E) 5. A Bill of Exchange is _________ a) A conditional promise to pay b) An unconditional promise to pay c) A conditional order to pay d) An unconditional order to pay 6. Out of the following bills, bill at sight is ______ a) Pay B Rs.500 on presentment b) Pay B Rs.500 after sight c) Pay B Rs.500 after 3 months d) None of these

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FINPREP Practice Problems Chapter Name Bills of exchange & Goods on approval or return basic Chapter No. 9
7. The term of a bill after sight commences __________ a) From the date of acceptance of the bill b) From the date of drawing a bill c) From the date of receipt of the accepted bill d) From the date of receipt of drawn bill 8. A bill drawn on 23.11.2005 as payable 2 months after date was accepted on 24.11.2005. the date of maturity of the bill will be a) 25.1.2006 b) 26.1.2006 c) 27.1.2006 d) None of these 9. Under which circumstances drawer and payee as 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 7.3.4. Foreign Bill 10. Which of the following is not a foreign bill? a) A bill drawn in India, on a person resident outside India and made payable outside India b) A bill drawn outside India, on a person resident outside India c) A bill drawn outside India, made payable in India d) A bill drawn on a person resident in India and made payable in India 7.3.5. Maturity date for P/N and B/E 11. A bill drawn on 23.11.2005 as payable 2 months after sight was accepted on 24.11.2005. the date of maturity of this bill will be a) 25.1.2006 b) 26.1.2006 c) 27.1.2006 d) None of these 12. A bill drawn on 23.11.2005 as payable 60 days after sight was accepted on 24.11.2005. the date of maturity of this bill will be a) 25.1.2005 b) 26.1.2005 c) 27.1.2005 d) None of these

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FINPREP Practice Problems Chapter Name Bills of exchange & Goods on approval or return basic Chapter No. 9

13. On 1.8.07, X drew a bill on Y for 30 days after sight. The date of acceptance is 8.8.07. the due date of the bill will be: a) 8.9.07 b) 10.9.07 c) 11.9.07 d) 9.9.07 14. On 18.2.07, A drew a bill on B for Rs.10,000. B accepted the bill on 21.2.07. The bill is drawn for 30 days after sight. The due date of the bill will be : a) 24.3.07 b) 22.3.07 c) 26.3.07 d) 21.3.07 15. A bill is drawn on 29th Jan 07, for 1 month after date. The date of acceptance is 2nd Feb 2007. The bill is drawn on 1 month after date basis. The due date of the bill will be: a) 28th Feb b) 1st March c) 2nd March d) 3rd March 7.3.6. Dishonour of B/E - Noting charges 16. In case of dishonour of a discounted bill, noting changes are initially paid by a) Drawer b) Drawee c) Banker d) None of these 17. In case of dishonour of a bill sent for collection to a banker, the noting charges are initially paid by ---a) Drawer b) Drawee c) Banker d) None of these 18. Which of the following is correct for presenting bill to notary public: a) To pay fees to notary public b) For bill for collection c) If the acceptor can prove that the bill was not properly presented to him for payment, he can escape the liability hence for dishonour it is produced. d) For drawing a fresh bill

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FINPREP Practice Problems Chapter Name Bills of exchange & Goods on approval or return basic Chapter No. 9

19. Fees paid in cash to Notary Public is charged by a) Drawer b) Drawee c) Holder of bill of exchange d) None

7.3.7. Renewal of B/E 20. When a bill is reneweda) Entries for cancellation of old bill and for recording new bill are required b) Only the entries for cancellation of old bill are required c) Only the entries for recording new bill are required d) None of these

7.3.8. Retirement of B/E 21. Discount at the time of retirement of a bill isa) A gain for the drawee b) A gain for the drawer c) A loss for the drawee d) None of these

7.3.10. Accommodation bills 22. The purpose of accommodation isa) To finance actual purchase or sale of goods b) To facilitate trade transmission c) When both parties are in need of funds d) At will

7.3.12. Journal entries in the books of drawer 23. When the bill honoured at the maturity date, the drawee debits _______ a) Drawers Account b) Bills payable Account c) Cash/Bank Account d) Holder of Bill Account (Banker/Endorsee) For Private Circulation to registered students. Page 6 of 15

FINPREP Practice Problems Chapter Name Bills of exchange & Goods on approval or return basic Chapter No. 9
7.3.14. Bills Receivable Book and Bills Payable Book 24. Total of Bills Payable Journal is posted to the ______ a) Credit of Bills Receivable A/c b) Credit of a Bills Payable A/c c) Credit of Drawers A/c d) Credit of Drawees A/c

7.3.15. Worked out examples 25. X sold goods to Y for Rs.2,00,000. Y paid cash Rs.50,000. X will grant 2% discount on balance and Y requests X to draw a bill for balance, the amount of bill will be: a) Rs.2,00,000 b) Rs.1,96,000 c) Rs.1,50,000 d) Rs.1,47,000 26. X sold goods to Y for Rs.2,00,000. of the amount will be received in cash and balance in B/R. For what amount X should draw the bill on Y. a) Rs.1,00,000 b) Rs.2,00,000 c) Nil d) None 27. A sold goods to B for Rs.1,50,000. A will grant 5% discount to B. B requested A to draw a bill. The amount of bills will be: a) Rs.1,50,000 b) Rs.1,42,500 c) Rs.1,45,000 d) Nil 28. On 01.01.07 X draws a bill on Y for Rs. 1,50,000 for 3 months. X got the bill discounted 4.1.07 at rate of 12% p.a. The amount of discount on bill will be: a) Rs.4,500 b) Rs.6,000 c) Rs.18,000 d) Rs.3,000 29. Mr. A draws a bill on Mr. Y for Rs.1,50,000 on 1.1.07 for 3 months. On 4.2.07 X got the bill discounted at the rate of 12% p.a. The amount of discount will be: a) Rs.3,000 b) Rs.4,000 c) Rs.12,000 d) Rs.2,000

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FINPREP Practice Problems Chapter Name Bills of exchange & Goods on approval or return basic Chapter No. 9
30. X got Ys acceptance for Rs.1,50,000 discounted at 2 months at 12% p.a. The amount of discount will be: a) Rs.3,000 b) Rs.1,500 c) Rs.4,500 d) Nil 31. X draws a bill on Y for Rs.1,50,000 for 3 months on 1.1.07. The bill is discounted with banker at a charge of Rs.4,500. At maturity the bill return dishonoured. In the books of X, for dishonour, the bank account will be credited by: a) Rs.1,45,500 b) Rs.1,50,000 c) Rs.1,54,500 d) None of these 32. A bill of Rs.1,50,000 was discounted by A with the banker of Rs.1,45,500. At maturity, the bill returned dishonoured, noting charges Rs.200. How much amount will the bank deduct from As bank balance at the time of such dishonour? a) Rs.1,45,500 b) Rs.1,45,700 c) Rs.1,50,000 d) Rs.1,50,200 33. X draws a bill in Y and got the bill discounted with the Bank. Y will pay the amount of the bill to: a) X b) Himself c) Banker d) None 34. On 1.1.07 X drew a bill on Y for Rs.1,50,000. At maturity, the bill returned dishonoured as Y become insolvent and 40 paisa per rupee is recovered from his estate. The amount recovered is: a) Rs.60,000 b) Rs.1,50,000 c) Rs.99,000 d) None 35. A draws a bill on B for Rs.1,50,000 for 3 months. At maturity, the bill returned dishonoured, noting charges Rs.1500. 40 Paisa in a rupee is recovered from Bs estate. The amount of deficiency to be recorded on insolvency in the books of B will be: a) Rs.60,600 b) Rs.90,900 c) Rs.58,400 d) Rs.57,000

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FINPREP Practice Problems Chapter Name Bills of exchange & Goods on approval or return basic Chapter No. 9
36. X sold goods to Y for Rs. 1,50,000 on 1.5.07. On the same day, he drew on Y a bill for the amount for 3 months, which Y duly accepted. X got the bill discounted with the Bank before the due date, Y became insolvent. Later, his estate could pay only 40% of the amount due. What will be the amount of deficiency in the books of Y? a) Rs.60,000 b) Rs.1,50,000 c) Rs.90,000 d) None of these 37. X draws a bill on Y. X endorsed the bill to Z. The payee of the bill will be: a) X b) Y c) Z d) None 38. X accepted a bill drawn by Y who endorsed the bill to Z. On the due date, the bill is dishonoured. To record the dishonour of the bill in the books of Y, which of the following accounts should be credited? a) X b) Bills Receivable Account c) Y d) Bills Payable Account 39. A draws a bill on B for Rs.1,50,000. A endorsed it to C in full settlement of Rs.1,51,000. Noting charges of Rs.600 as the bill returned dishonoured. A wants to pay the amount to C at 2% discount. The amount to be paid by A to C will be: a) Rs.1,37,000 b) Rs.1,38,470 c) Rs.1,49,058 d) Rs.1,51,500 40. A draws a bill on B for Rs.1,50,000. A endorsed the bill to C. The bill returned dishonoured. Noting Charges Rs.1500. B request A to accept the amount at 2% discount by a single cheque. The cheque amount will be: a) Rs.1,47,000 b) Rs.1,48,470 c) Rs.1,49,500 d) Rs.1,51,470

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FINPREP Practice Problems Chapter Name Bills of exchange & Goods on approval or return basic Chapter No. 9
41. A draws a bill on B for Rs.1,50,000. A wants to endorse it to C in settlement of Rs.1,75,000 at 2% discount with the help of Bs acceptance and balance in cash. How much cash A will pay to B? a) Rs.21,500 b) Rs.20,000 c) Rs.20,500 d) Rs.25,000 42. X drew a bill on Y for Rs.3,000. X endorsed it to Z who endorsed it to W. The payee of the bill will be: a) X b) Y c) Z d) W

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FINPREP Practice Problems Chapter Name Bills of exchange & Goods on approval or return basic Chapter No. 9

Goods on Approval or Sale or Return Basis

7.4.1 Basics: 43. Under sales on return or approval basis, the ownership of goods is passed only a) When the retailer gives his approval b) If the goods are not returned within specified period c) Both (a) & (b) d) None of the above 44. Under sales on returned or approval basis, when transactions are few, the seller, while sending the goods, treats them as a) An ordinary sale but no entry is passed in the books b) An ordinary sale and entry for normal sale is passed in the books c) Approval sale and no entry is passed d) None of these 7.4.2 Accounting for goods sent on approval or return basis: 45. On 31st December 2006, goods sold at a sale price of Rs.60,000 were lying with customer, Mohan to whom these goods were sold on sale or return basis and recorded as actual sales. Since no consent was received from Mohan, the adjustment entry was made presuming goods were sent n approval at a profit of cost plus 20%. In the balance sheet, the stock with customers account will be shown at a) Rs.60,000 b) Rs.48,000 c) Rs.40,000 d) Rs.50,000 46. A sent some goods costing Rs.10,500 at a profit of 25% on sale to B on sale or return basis. B returned goods costing Rs.2,400. At the end of the accounting period i.e., on 31st December,2007, the remaining goods were neither returned nor were approved by him. The stock on approval will be shown in the balance sheet at a) Rs.6,000 b) Rs.8,100 c) Rs.6,075 d) Rs.10,500

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FINPREP Practice Problems Chapter Name Bills of exchange & Goods on approval or return basic Chapter No. 9
47. The merchant sends out his goods casually to his dealers on approval basis. All such transactions are, however, recorded as actual sales and are passed through the sales book. On 31.12.2006, it was found that 100 articles at a sale price of Rs.400 each sent on approval basis were recorded as actual sales at that price. The sale price was made at cost plus 25%. The amount of stock on approval will be a) Rs.32,000 b) Rs.40,000 c) Rs.30,000 d) None of these 48. The X sends goods on approval basis as follows : The stock of goods sent on approval basis on 31st January will be: Date Customers Sale price of Goods Accepted Goods Returned January, 2006 Name Goods Sent Rs. Rs. Rs. 9 A 10,000 8,000 2,000 11 B 9,000 9,000 ----16 C 8,000 -----8,000 23 D 9,000 2,000 7,000 st The stock of goods sent on approval basis on 31 January will be a) Rs.2,000 b) Nil c) Rs.7,000 d) None of the above 49. A company sends his cars to dealers on sale or return basis. All such transactions are however treated like actual sales and are passed through the sales day book. Just before the end of the financial year, two cars which costs Rs.50,000 each have been sent on sale or return basis and have been debited to customers at Rs.60,000 each, cost of goods lying with the customers will be: a) Rs.1,00,000 b) Rs.1,20,000 c) Rs.60,000 d) None of these 7.4.2.1 Goods are sent casually: 50. Under Sales or Return or Approval basis when the transactions are few and the seller sends the goods on approval or return basis, the accounting treatment will be a) No Journal Entry b) Entry in Sales or Return Journal c) Entry in Sales or Return Day book d) Sundry Debtors A/c Dr. To Sales A/c For Private Circulation to registered students. Page 12 of 15

FINPREP Practice Problems Chapter Name Bills of exchange & Goods on approval or return basic Chapter No. 9
51. Under Sales on return or approval basis when the transactions are few and the customer accepts the goods, the accounting treatment will be a) No Journal Entry b) Entry in Sales or Return Journal c) Entry in Sales or Return Day book d) Sundry Debtors A/c Dr. To Sales A/c 52. Under Sales on Return or Approval basis when the transactions are few and the seller at the end of the accounting year reverse the sale entry, then what will be the accounting treatment for the goods returned by the customers on a subsequent date? a) No entry will be passed for such return of goods b) Entry for return of goods is passed by the seller c) Only the stock account will be adjusted d) None of these 7.4.2.2 Goods are sent frequently, but not numerously: 53. Under Sale or Return or Approval basis when the transactions are moderate and the seller sends the goods on approval or return basis, the accounting treatment will be a) No Journal Entry b) Entry in Sales or Return Journal c) Entry in Sales or Return Day book d) Sundry Debtors A/c Dr. To Sales A/c 54. Which of the following is not a main column of sales or return journal? a) Goods sent on approval column b) Goods returned column c) Goods approved column d) Purchase column 55. When Sales or Return Journal is maintained, a journal entry is passed for : a) Goods delivered b) Goods returned c) Goods approved d) None of these 7.4.2.3 Goods are sent frequently and numerously 56. Under Sale or Return or Approval basis when the transactions are large and the seller sends the goods on approval or return basis, the accounting treatment will be a) No Journal Entry b) Entry in Sales or Return Journal c) Entry in Sales or Return Day book d) Sundry Debtors A/c Dr. To Sales A/c For Private Circulation to registered students. Page 13 of 15

FINPREP Practice Problems Chapter Name Bills of exchange & Goods on approval or return basic Chapter No. 9
57. Sale or Return Day Book and Sale or Return Ledger are known as, a) Principal Books b) Subsidiary Books c) Memorandum Books d) None of these 58. In the Sale or Return Ledger a) All the customers are individually debited and the sale or return account is credited with the periodical total of the Sale or Return Day Book b) All the customers are debited in total and the sale or return account is credited with the periodical total of the Sale or Return Day Book c) All the customers are individually debited and the sale or return account is also credited with the individual total of the Sale or Return Day Book d) None of these 59. When Sale or Return Day Book and Sale or Return Ledger are maintained and the goods are sent to the customers on sale or return basis, these are recorded: a) Initially in the Sale or Return Day Book. Thereafter in the Sale or Return Ledger. b) Only in the Sales or Return Day Book c) Only in the Sale Day Book d) Both in Sale or Return Day Book and Sales Day Book 60. When the goods are returned by customers within the specified time, they are recorded a) Initially in the Sale or Returned Ledger. Thereafter in the Sale or Return Day Book. b) Initially in the Sale or Return Day Book. Thereafter in the Sale or Returned Ledger. c) Only in the Sale or Returned Day Book. d) Only in the Sale or Returned Ledger. 61. When Sale or Return Day Book and Sale or Return Ledger are maintained and the goods are approved by the customers, these are recorded: a) Initially in the Sale or Return Day Book. Thereafter in the Sale or Returned Ledger. b) Only in the Sale or Returned Day Book c) Only in the Sales Day Book d) Both in Sales or Return Day Book and Sales Day Book 62. When a large number of articles are sent on a sale or return basis, it is necessary to maintain a) Sales Journal b) Goods returned journal c) Sale or Return Journal d) None of these

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FINPREP Practice Problems Chapter Name Bills of exchange & Goods on approval or return basic Chapter No. 9

Answers

1. B 2. B 3. A 4. D 5. D 6. A 7. A 8. A 9. C 10. D 11. C 12. A 13. B 14. C 15. D 16. C 17. C 18. C 19. C 20. A 21. A

22. C 23. B 24. B 25. D 26. A 27. B 28. A 29. A 30. A 31. B 32. D 33. C 34. A 35. B 36. C 37. C 38. C 39. C 40. B 41. A 42. D

43. C 44. B 45. D 46. B 47. A 48. B 49. A 50. D 51. A 52. A 53. B 54. D 55. C 56. C 57. C 58. A 59. A 60. B 61. D 62. C

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