alleryInsolvency of drawee on a bill leads drawer to:
ARecover full bill amount
BSell bill back to bank
CWrite off full amount
DRecover only dividend amount
Answer & Solution
Correct answer: D. Recover only dividend amount
1. On insolvency, only a partial dividend may be received from drawee's estate.
2. Drawer records cash received and writes off the balance as bad debt.
3. Entry: Cash Dr (dividend) + Bad Debts Dr (shortfall); To Drawee A/c.
_Source: ICAI BoS Foundation Paper 1, Ch 6 "Bills of Exchange", §9 insolvency_
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