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CA Foundation Bills of Exchange and Promissory Notes — practice questions

Explore 93 free Bills of Exchange and Promissory Notes questions in CA Foundation Accounting. Open each question or exercise to read its content, reference answers and available explanation.

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Bills of Exchange and Promissory Notes questions and exercises with answers

Showing questions 1–30 of 93.

A Bill of Exchange contains:Read the answer and worked solution →How many parties are typically involved in a Bill of Exchange?Read the answer and worked solution →Who is the primary party liable on a Bill of Exchange?Read the answer and worked solution →A promissory note requires acceptance from:Read the answer and worked solution →The term of a Bill of Exchange usually does not exceed:Read the answer and worked solution →On discounting a bill with the bank, the journal entry credits:Read the answer and worked solution →When a bill is endorsed in favour of a creditor, the entry credits:Read the answer and worked solution →If a bill discounted with bank is dishonoured, the entry debits:Read the answer and worked solution →A Bill of Exchange must be:Read the answer and worked solution →Discount on a bill is the difference between:Read the answer and worked solution →Accommodation bills are drawn primarily to:Read the answer and worked solution →Days of grace allowed on a bill in India are:Read the answer and worked solution →Foreign bills are generally drawn in:Read the answer and worked solution →Bill of ₹1,00,000 dated 1 March 2022 for 3 months. Maturity date is:Read the answer and worked solution →Bill of ₹50,000 discounted with bank at 12% p.a. for 90 days. Discount and cash received:Read the answer and worked solution →On dishonour of bill discounted with bank, drawer's books debit:Read the answer and worked solution →Bill renewed at request of drawee. The drawer's first entry credits:Read the answer and worked solution →Retirement of a bill before due date means:Read the answer and worked solution →Noting charges paid by bank on dishonour are ultimately borne by:Read the answer and worked solution →Insolvency of drawee on a bill leads drawer to:Read the answer and worked solution →Drawer A receives bill from drawee B and endorses to creditor C. On dishonour:Read the answer and worked solution →Difference between Bill of Exchange and Promissory Note: in PN the maker is the:Read the answer and worked solution →Notice of dishonour is required for:Read the answer and worked solution →Bills payable account in books of acceptor on acceptance is:Read the answer and worked solution →Stamp duty on a bill of exchange is paid by:Read the answer and worked solution →Match each party to a billRead the answer and worked solution →Key in the bill numberRead the answer and worked solution →Who signs the unconditional undertaking in a promissory note?Read the answer and worked solution →In a bill of exchange, the person who gives the written order to pay is called the:Read the answer and worked solution →Which party to a bill of exchange is the one directed to make the payment?Read the answer and worked solution →

Worked practice questions

A Bill of Exchange contains:

  1. An unconditional order
  2. An unconditional promise
  3. Conditional pay promise
  4. Pledge of goods deed
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Correct answer: A. An unconditional order

1. Negotiable Instruments Act defines a bill as an instrument in writing with an unconditional ORDER. 2. The order is from the drawer to the drawee/acceptor. 3. A promissory note, by contrast, contains a PROMISE. _Source: ICAI BoS Foundation Paper 1, Ch 6 "Bills of Exchange", §1 ¶2_

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How many parties are typically involved in a Bill of Exchange?

  1. Two parties only
  2. Three parties usually
  3. Five parties usually
  4. One single party
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Correct answer: B. Three parties usually

1. Bill of Exchange has three parties: Drawer, Drawee/Acceptor, and Payee. 2. The drawer and payee can be the same person. 3. Promissory note involves only two parties (Maker and Payee). _Source: ICAI BoS Foundation Paper 1, Ch 6 "Bills of Exchange", §1 ¶4_

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Who is the primary party liable on a Bill of Exchange?

  1. Drawer of the bill
  2. Endorser of the bill
  3. Acceptor of the bill
  4. Payee of the bill
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Correct answer: C. Acceptor of the bill

1. The acceptor accepts the bill, becoming primarily liable. 2. Drawer and endorsers have secondary liability if acceptor defaults. 3. The payee is the beneficiary, not liable as such. _Source: ICAI BoS Foundation Paper 1, Ch 6 "Bills of Exchange", §1 ¶5_

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