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CA Foundation Bills of Exchange — practice questions

Explore 5 free Bills of Exchange questions in CA Foundation Accountancy. Open each question or exercise to read its content, reference answers and available explanation.

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Bills of Exchange questions and exercises with answers

Showing questions 1–5 of 5.

A Bill of Exchange must be in writing andRead the answer and worked solution →Days of grace allowed on a usance bill in India areRead the answer and worked solution →Endorsement of a bill meansRead the answer and worked solution →If a bill is dishonoured, noting charges paid by the holder are ultimately borne byRead the answer and worked solution →Bill of Exchange is governed by which Act in India?Read the answer and worked solution →

Worked practice questions

A Bill of Exchange must be in writing and

  1. Signed by the drawer
  2. Oral acceptance is enough
  3. Signed by the drawee only
  4. Notarised compulsorily
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Correct answer: A. Signed by the drawer

1. Section 5 of the Negotiable Instruments Act 1881 requires a bill to be in writing and SIGNED BY THE DRAWER. 2. Acceptance by drawee converts it into a binding instrument. 3. Notarisation is needed only for noting on dishonour. 4. Hence (B) is required for validity. _Source: Maharashtra Balbharati Std XII Book-Keeping & Accountancy, Ch 7 "Bills of Exchange", §7.1 ¶§7.1_

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Days of grace allowed on a usance bill in India are

  1. 1 day
  2. 2 days
  3. 3 days
  4. 5 days
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Correct answer: C. 3 days

1. Indian law allows three days of grace beyond the bill's stated period. 2. A 60-day bill drawn on 1 Apr matures on 1 Jun + 3 days = 4 Jun. 3. If the maturity date falls on a holiday, payment is due the preceding business day. 4. Hence (C) is correct. _Source: Maharashtra Balbharati Std XII Book-Keeping & Accountancy, Ch 7 "Bills of Exchange", §7.2 ¶§7.2_

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Endorsement of a bill means

  1. Cancelling the bill (typical) (typical)
  2. Discounting it at a bank (typical) (typical)
  3. Re-drafting the bill (typical) (typical)
  4. Signing the back of the bill to transfer rights
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Correct answer: D. Signing the back of the bill to transfer rights

1. Endorsement is the writing of one's name on the back of a negotiable instrument. 2. It transfers the right, title and interest in the bill to another party. 3. Discounting and cancellation are distinct acts. 4. Hence (B) is correct. _Source: Maharashtra Balbharati Std XII Book-Keeping & Accountancy, Ch 7 "Bills of Exchange", §7.3 ¶§7.3_

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