Home › CA Foundation › accounting › Bills of Exchange and Promissory Notes › Insolvency of drawee on a bill leads drawer to:
Insolvency 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_
Related questions
Stamp duty on a bill of exchange is paid by:Bills payable account in books of acceptor on acceptance is:Notice of dishonour is required for:Difference between Bill of Exchange and Promissory Note: in PN the maker is the:Drawer A receives bill from drawee B and endorses to creditor C. On dishonour:Noting charges paid by bank on dishonour are ultimately borne by:Retirement of a bill before due date means:Bill renewed at request of drawee. The drawer's first entry credits: