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BILL OF EXCHANGE Chapter 9 - Bill Of Exchange (Trade Bill)

Chapter 9 - Bill of Exchange (Trade Bill)

Objective Type Questions

Textual Problems

Problem No. 1 Problem No. 2 Problem No. 3 Problem No. 4 Problem No. 5 Problem No. 6 Problem No. 7 Problem No. 8 Problem No. 9 Problem No. 10 Problem No. 11 Problem No. 12 Problem No. 13 Problem No. 14 Problem No. 15 Problem No. 16 Problem No. 17 Problem No. 18

Accounts Board Papers with Solutions

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Extra Practice Problems with Complete Solutions

A set of 40 additional questions for comprehensive practice.

Problem No. 1

Journalise the following transactions in the books of Maharaja. [Ans]

  1. Ayub informs Maharaja that Sadashiv’s acceptance for Rs. 2,000, endorsed to Ayub, has been dishonoured. Noting charges amounted to Rs. 150.
  2. Pankaj renews his acceptance to Maharaja for Rs. 1,200 by paying Rs. 400 in cash and accepting a fresh bill for the balance plus interest at 12% p.a. for 3 months.
  3. Vaibhav’s acceptance to Maharaja for Rs. 6,000 retired one month before the due date at a discount of 12% p.a.
  4. The bank informs Maharaja about the dishonour of Kasam’s acceptance for Rs. 2,000, which was discounted with the bank. Noting charges are Rs. 200.

Problem No. 2

Journalise the following transactions in the books of Bhaskar. [Ans]

  1. Suresh informed Bhaskar that Nishad’s acceptance for Rs. 2,500, endorsed to Suresh, has been dishonoured, and noting charges amounted to Rs. 25.
  2. Rajesh renews his acceptance to Bhaskar for Rs. 7,500 by paying Rs. 2,500 in cash and accepting a fresh bill for the balance plus interest at 10% p.a. for three months.
  3. Mandar retired his acceptance to Bhaskar for Rs. 3,800 by paying Rs. 3,750 in cash.
  4. Bhaskar sent a bill of Dayaram for Rs. 5,000 to the bank for collection. The bank later informed that the bill has been dishonoured by Dayaram.

Problem No. 3

Journalise the following transactions in the books of Kamesh: [Ans]

  1. Nanda informs Kamesh that Shanti’s acceptance for Rs. 4,000, endorsed to Nanda, has been dishonoured and noting charges were Rs. 100.
  2. Ashok renews his acceptance to Kamesh for Rs. 2,400 by paying Rs. 800 in cash and accepting a new bill for the balance plus interest at 12% p.a. for 3 months.
  3. Deva’s acceptance to Kamesh for Rs. 12,000 is retired one month before its due date at a discount of 12% p.a.
  4. The bank informs Kamesh that Sudhakar’s acceptance for Rs. 4,000 has been dishonoured, and it has paid noting charges of Rs. 80.

Problem No. 4

On 1st March 2013, Ramchandra sold goods to Raman worth Rs. 8,000, and Raman accepted a Bill for Rs. 8,000 at 3 months drawn by Ramchandra. Ramchandra discounted the bill with his bank at 6% p.a. On the due date, the bill was dishonoured, and Raman requested Ramchandra to accept Rs. 4,000 immediately and draw upon him a new bill for the remaining amount at 3 months, together with interest at 10% p.a. Ramchandra agreed. The second Bill was duly honoured. Give Journal entries in the books of Ramchandra. [Ans]

Problem No. 5

Premlal sold goods to Sunderlal worth Rs. 10,000, and Sunderlal accepted the bill for Rs. 10,000 at 3 months drawn by Premlal. Premlal discounted the bill with his bank at 6% p.a. On the due date, the bill was dishonoured, and Sunderlal requested Premlal to accept Rs. 4,000 immediately and draw upon him a new bill for the remaining amount at 3 months, together with an interest at 10% p.a. Premlal agreed, and the second bill was duly honoured. Give the Journal entries in the books of Premlal. [Ans]

Problem No. 6

Archana purchased goods from Babita on credit for Rs. 20,000. The next day, Archana paid Rs. 10,000 to Babita and accepted a bill drawn by Babita for the balance amount for four months. Babita discounted the bill with her bank for Rs. 9,600. Before the due date, Archana approached Babita with a request to renew the Bill. Babita agreed on the condition that Archana should pay Rs. 6,000 along with interest of Rs. 120 and accept a new bill for the balance. These arrangements were duly carried out. The new bill was met on the due date. Pass journal entries in the books of Babita. [Ans]

Problem No. 7

Bhagyashri sold goods to Rupa worth Rs. 24,000. The next day, Rupa paid Rs. 10,000 in cash and accepted a 4-month bill for the balance amount drawn by Bhagyashri. Bhagyashri discounted the bill at 10% p.a. after one month with her bank. On the due date, Rupa dishonoured her acceptance, and noting charges amounted to Rs. 200. Rupa paid half the amount of the bill and the full amount of noting charges. Rupa accepted a new bill at 2 months for the balance amount plus interest of Rs. 100. Pass necessary journal entries in the books of Bhagyashri. [Ans]

Problem No. 8

Baloo owes Kaloo Rs. 8,000. Kaloo then draws a bill for Rs. 8,000 on Baloo for a period of three months. Baloo accepts and returns it to Kaloo. Kaloo discounted the bill with his bank at 12% p.a. On the due date, the bill was dishonoured; noting charges amounted to Rs. 30. Kaloo then draws a bill for the balance plus interest of Rs. 170. Before the due date of this bill, Baloo pays the amount at a discount of Rs. 40 to retire the bill. Pass Journal Entries in the books of Kaloo. [Ans]

Problem No. 9

Minal draws a bill on Usha for Rs. 5,000 at 3 months. Usha accepts the bill and returns it to Minal. Minal discounted the bill at 12% p.a. with the bank. On maturity, Usha finds herself unable to make payment of the bill and requests Minal to renew it. Minal accepts the proposal on the condition that Usha should pay Rs. 2,000 in cash and accept a new bill at one month along with interest at 10% p.a. These arrangements were carried through. Usha retires the bill by paying Rs. 3,015. Pass Journal Entries in the books of Minal. [Ans]

Problem No. 10

Sonia draws a bill on Moni for Rs. 6,000 at 4 months. Moni accepts the bill and returns it to Sonia, who discounts the bill with the bank at a discount of 8% p.a. Before the due date of the bill, Moni requested Sonia to accept Rs. 4,000 in cash and draw a bill for the balance plus interest at 12% p.a. for two months. Sonia draws a bill as the request is agreed. The bill is sent to the bank for collection. On the due date, the bill was honoured. Pass the necessary journal entries in the books of Sonia. [Ans]

Problem No. 11

On 1st March 2014, Bheem sold goods to Raju worth Rs. 10,000, and Raju accepted a Bill for Rs. 10,000 at 3 months drawn by Bheem. Bheem discounted the bill with his bank at 10% p.a. On the due date, the bill was dishonoured, and Raju requested Bheem to accept Rs. 4,000 immediately and draw a new bill for the remaining amount at 3 months, together with interest at 10% p.a. Bheem agreed. The second Bill was duly honoured. Give Journal entries in the books of Bheem. [Ans]

Problem No. 12

Sachin sold goods to Dhoni worth Rs. 1,00,000, and Dhoni accepted a bill for Rs. 1,00,000 at 3 months drawn by Sachin. Sachin discounted the bill with his bank at 10% p.a. On the due date, the bill was dishonoured, and Dhoni requested Sachin to accept Rs. 40,000 immediately and draw a new bill for the remaining amount at 3 months, together with interest at 10% p.a. Sachin agreed, and the second bill was duly honoured. Give the Journal entries in the books of Dhoni. [Ans]

Problem No. 13

Rose purchased goods from Lilly on credit for Rs. 2,000. The next day, Rose paid Rs. 1,000 to Lilly and accepted a bill drawn by Lilly for the balance amount for four months. Lilly discounted the bill with her bank for Rs. 960. Before the due date, Rose approached Lilly with a request to renew the Bill. Lilly agreed on the condition that Rose should pay Rs. 600 along with interest of Rs. 12 and accept a new bill for the balance. These arrangements were duly carried out. The new bill was met on the due date. Pass journal entries in the books of Lilly. [Ans]

Problem No. 14

Kaveri sold goods to Ganga worth Rs. 4,000. The next day, Ganga paid Rs. 1,000 in cash and accepted a 4-month bill for the balance amount drawn by Kaveri. Kaveri discounted the bill at 10% p.a. after one month with her bank. On the due date, Ganga dishonoured her acceptance, and noting charges amounted to Rs. 20. Ganga paid half the amount of the bill and the full amount of noting charges. Ganga accepted a new bill at 2 months for the balance amount plus interest of Rs. 100. Pass necessary journal entries in the books of Kaveri. [Ans]

Problem No. 15

Ronaldo owes Ricardo Rs. 80,000. Ricardo then draws a bill for Rs. 80,000 on Ronaldo for a period of three months. Ronaldo accepts and returns it to Ricardo. Ricardo discounted the bill with his bank at 10% p.a. On the due date, the bill was dishonoured; noting charges amounted to Rs. 300. Ricardo then draws a bill for the balance plus interest of Rs. 1,700. Before the due date of this bill, Ronaldo pays the amount at a discount of Rs. 400 to retire the bill. Journal Entries in the books of Ronaldo. [Ans]

Problem No. 16

Sun draws a bill on Moon for Rs. 15,000 at 3 months. Moon accepts the bill and returns it to Sun. Sun discounted the bill at 10% p.a. with the bank. On maturity, Moon finds herself unable to make payment of the bill and requests Sun to renew it. Sun accepts the proposal on the condition that Moon should pay Rs. 12,000 in cash and accept a new bill at one month along with interest at 10% p.a. These arrangements were carried through. Moon retires the bill by paying Rs. 3,015. Pass Journal Entries in the books of Sun. [Ans]

Problem No. 17

Nazriya draws a bill on Anitha for Rs. 60,000 at 4 months. Anitha accepts the bill and returns it to Nazriya, who discounts the bill with the bank at a discount of 10% p.a. Before the due date of the Bill, Anitha requested Nazriya to accept Rs. 40,000 in cash and draw a bill for the balance plus interest at 12% p.a. for two months. Nazriya draws a bill as the request is agreed. The bill is sent to the bank for collection. On the due date, the bill was honoured. Pass the necessary journal entries in the books of Anitha. [Ans]

Problem No. 18

Anil drew a bill for Rs. 4,000 on Navin on 1st May 2013 for three months. This was for the amount which Navin owed to Anil. Navin accepted the same and returned it to Anil, who discounted it at his bank for Rs. 3,900. On 1st August 2013, Navin requested Anil to renew the bill. Anil agreed on the condition that Rs. 1,000 is paid immediately and Navin should accept a new bill for 3 months for the balance payable plus interest of Rs. 45. These arrangements were carried through. However, on 1st October 2013, Navin retired his acceptance for Rs. 3,035. Pass journal entries in the books of Anil. [Ans]

Problem No. 19

Karthik accepted a bill for Rs. 20,000 drawn by Jones at three months. Jones got the bill discounted with his bank for Rs. 19,900. Before the due date, Karthik approached Jones for renewal of the bill. Jones agreed on the condition that Rs. 10,000 be paid immediately, together with interest on the remaining amount at 6% p.a. For the balance, Karthik should accept a new bill for three months. These arrangements were carried through, but afterwards, Karthik became insolvent, and only 80% of the amount could be recovered from his estate. Give journal entries in the books of Karthik. [Ans]

Problem No. 20

Ajith accepted a bill for Rs. 10,000 drawn by Surya at three months. Surya got the bill discounted with his bank for Rs. 9,700. Before the due date, Ajith approached Surya for renewal of the Bill. Surya agreed on the condition that Rs. 7,000 is paid immediately, together with interest on the remaining amount at 18% p.a. for four months, and for the balance, Ajith should accept a new bill. But afterwards, Ajith became insolvent, and only 25% of the amount could be recovered from her estate. Pass journal entries in the books of Surya. [Ans]

Problem No. 21

Salman drew a bill on Amitabh worth Rs. 90,000 for three months, which was accepted by Amitabh. On the same date, Salman discounted the bill with his bank at 10% p.a. On the due date, Amitabh dishonoured his acceptance. Amitabh paid Rs. 40,000 to Salman and accepted a fresh bill for two months for the balance, including interest of Rs. 4,000. Amitabh became insolvent before the maturity of the bill, and 50 paise per rupee was received as a first and final dividend from his estate. Prepare journal entries in the books of Amitabh. [ANS]

Problem No. 22

On 1st January 2014, Archana drew a bill for Rs. 6,000 for a 2-month period on Ramya. Ramya duly accepted the bill. On 4th January 2014, Archana discounted the bill with her bank for Rs. 5,850. However, on the due date, the bill was dishonoured. Ramya agreed to accept a new bill with an interest of Rs. 150 for a period of one month. The bill was duly met on the due date. Give the journal entries in the books of Archana and show Archana’s account in the books of Ramya. [ANS]

Problem No. 23

Mukesh owes Anil Rs. 40,000, for which Anil draws a bill for 2 months on 1st February 2014. Mukesh accepts it and returns it to Anil. On 4th March 2014, Mukesh approaches Anil and requests him to accept Rs. 10,000 in cash and draw a fresh bill for 3 months for the balance plus interest at 10% p.a. Anil accepts the request and draws a bill accordingly, which is accepted by Mukesh. On 1st June 2014, Mukesh retired his acceptance under a discount of Rs. 30. Pass journal entries in the books of Anil and prepare Anil's account in the ledger of Mukesh. [ANS]

Problem No. 24

Anjali of Nagpur sold goods worth Rs. 25,000 to Rupali of Amaravati. The next day, Rupali paid Rs. 10,000 in cash and accepted a two-month bill for the balance drawn by Anjali. Anjali discounted the bill at 12% p.a. with her bank. Before the due date, Rupali finds herself unable to make payment of the bill and requests Anjali to renew it. Anjali accepts the proposal on the condition that Rupali should pay Rs. 5,000 in cash and accept a new bill for one month along with interest of Rs. 200 for the balance. These arrangements were carried through. The new bill was met on the due date. Give journal entries in the books of Anjali. [ANS]

Problem No. 25

Prakash drew a bill for Rs. 4,000 on Anand on 1st May 2013 for three months. This was for the amount which Anand owed to Prakash. Anand accepted the same and returned it to Prakash, who discounted it at his bank for Rs. 3,900. On 1st August 2013, Anand requested Prakash to renew the bill. Prakash agreed on the condition that Rs. 1,000 is paid immediately and Anand should accept the new bill for 3 months for the balance payable plus interest of Rs. 45. These arrangements were carried through. However, on 1st October 2013, Anand retired his acceptance for Rs. 3,035. Pass journal entries in the books of Anand. [Ans]

Problem No. 26

Chanda accepted a bill for Rs. 6,000 drawn by Nanda at three months. Nanda got the bill discounted with his bank for Rs. 5,700. Before the due date, Chanda approached Nanda for renewal of the Bill. Nanda agreed on the condition that Rs. 3,000 is paid immediately, together with interest on the remaining amount at 18% p.a. for four months, and for the balance, Chanda should accept a new bill. But afterwards, Chanda became insolvent, and only 25% of the amount could be recovered from her estate. Pass journal entries in the books of Chanda. [Ans]

Problem No. 27

Pankaj draws a bill on Anil worth Rs. 8,000 for three months, which was accepted by Anil. On the same date, Pankaj discounted the bill with his bank at 10% p.a. On the due date, Anil dishonoured his acceptance. Anil paid Rs. 4,000 to Pankaj and accepted a fresh bill for two months for the balance, including interest of Rs. 40. Anil became insolvent before the maturity of the bill, and 50 paise per rupee was received as a first and final dividend from his estate. Give Journal entries in the books of Anil. [Ans]

Problem No. 28

On 1st January 1988, Vandana drew a bill for Rs. 6,000 for a 2-month period on Lata. Lata duly accepted the bill. On 4th January 1988, Vandana discounted the bill with her bank for Rs. 5,850. However, on the due date, the bill was dishonoured. Lata agreed to accept a new bill with an interest of Rs. 100 for a period of one month. The bill was duly met on the due date. Give the journal entries in the books of Vandana and show Vandana’s account in the books of Lata. [Ans]

Problem No. 29

Mukund owes Prakash Rs. 4,000, for which Prakash draws a bill for 2 months on 1st February 1989. Mukund accepts it and returns it to Prakash. On 4th March 1989, Mukund approaches Prakash and requests him to accept Rs. 1,000 in cash and draw a fresh bill for 3 months for the balance plus interest at 10% p.a. Prakash accepts the request and draws a bill accordingly, which is accepted by Mukund. On 1st June 1989, Mukund retired his acceptance under a discount of Rs. 30. Pass journal entries in the books of Prakash and prepare Prakash's account in the ledger of Mukund. [Ans]

Problem No. 30

Journalise the following transactions in the books of Kedarnath: [ANS]

  1. Badrinath informs Kedarnath that Aloknath's acceptance of Rs. 16,000, endorsed to Badrinath, has been dishonoured and noting charges amounted to Rs. 500.
  2. Somnath renews his acceptance of Rs. 14,400 to Kedarnath by paying cash of Rs. 4,400 and accepting a new bill for 2 months for the balance plus interest at 12% p.a.
  3. Vishwanath retired his acceptance for Rs. 10,500 to Kedarnath by paying Rs. 10,250 in cash.
  4. Recovered only 50% of the amount due from the private estate of Ramnath, who was declared insolvent, against his bill of Rs. 12,500.

Problem No. 31

Krishna accepted a bill for three months drawn by Rama for Rs. 4,000. Rama discounted the bill with the bank for Rs. 3,900. On the date of maturity, the bill was dishonoured. Rama paid noting charges of Rs. 20. Krishna paid half the amount of the bill and the full amount of the noting charges and accepted a bill for the balance including interest of Rs. 50. The second bill was duly honoured. Pass necessary journal entries in the books of Rama and show Krishna’s account. [Ans]

Problem No. 32

Sagar owes Sindhu Rs. 8,000. Sagar accepted a bill for 3 months drawn by Sindhu for Rs. 8,000. Sindhu discounted the bill with the bank for Rs. 7,800. On the due date, the bill was dishonoured. Noting charges amounted to Rs. 20. Sagar paid half the amount of the bill and the full amount of the noting charges, including interest of Rs. 100. Pass journal entries in the books of Sindhu and show the account of Sagar. [Ans]

Problem No. 33

Jain purchased goods worth Rs. 3,000 from Sharma on 1st June 1977 and gave him an acceptance on 3rd June for a period of three months. On 15th June, Sharma discounted the bill for Rs. 2,980. On 6th September, when the bill was presented for payment, Jain dishonoured it. Rs. 20 was paid as noting charges. Pass journal entries in the books of Sharma and show Sharma’s account in the books of Jain. [Ans]

Problem No. 34

Ameet draws a bill for Rs. 7,500 on Tushar for four months. Ameet discounts the bill with the bank at 8% p.a. On the due date, Tushar requested Ameet to accept Rs. 4,700 (including Rs. 200 for interest) and to draw a bill for the balance for three months. Ameet agrees to this proposal. Before the due date of the new bill, Tushar retires the bill for Rs. 2,960. Pass the journal entries in the books of Tushar and open Tushar’s account in the books of Ameet. [Ans]

Problem No. 35

Journalise the following transactions in the books of Rahul. [Ans]

  1. Pradeep informed Rahul that Vijay’s acceptance for Rs. 1,000, endorsed to Pradeep, has been dishonoured. Noting charges amounted to Rs. 50.
  2. Nilesh renews his acceptance to Rahul for Rs. 600 by paying Rs. 200 in cash and accepting a fresh bill for the balance plus interest at 12% p.a. for 3 months.
  3. Prashant’s acceptance to Rahul for Rs. 3,000 retired one month before the due date at a discount of 12% p.a.
  4. The bank informs Rahul about the dishonour of Aviraj’s acceptance for Rs. 1,000, discounted with the bank. Noting charges are Rs. 20.

Problem No. 36

Journalise the following transactions in the books of Mr. Ashok Agrawal. [Ans]

  1. The bank informed Mr. Ashok Agrawal that Kamlesh’s acceptance for Rs. 12,000 sent to the bank for collection had been honoured, and bank charges debited were Rs. 60.
  2. Discharged Dr. Ashok Agrawal’s acceptance to Mahesh for Rs. 15,250 by endorsing Prakash’s acceptance to Mr. Ashok Agrawal for Rs. 15,100.
  3. Vishal renewed his acceptance to Mr. Ashok Agrawal for Rs. 11,200 by paying Rs. 6,000 in cash and accepting a fresh bill for the balance plus interest at 12% p.a. for three months.
  4. Dinesh, who had accepted Mr. Ashok Agrawal’s bill of Rs. 14,000, was declared bankrupt, and only 45% of the amount due could be recovered from his estate.

Problem No. 37

Journalise the following transactions in the books of Kamalakar. [Ans]

  1. Nisha informs Kamalakar that Shanti’s acceptance for Rs. 14,000, endorsed to Nisha, has been dishonoured, and noting charges of Rs. 200 have been paid.
  2. Asha renews her acceptance to Kamalakar for Rs. 12,400 by paying Rs. 6,000 in cash and accepting a new bill for the balance plus interest at 12% p.a. for 3 months.
  3. The bank informs Kamalakar that Sindhu’s acceptance for Rs. 15,000 has been dishonoured, and it has paid noting charges of Rs. 100.
  4. The bank informs Kamalakar that Sangita’s acceptance for Rs. 12,000, which was sent to the bank for collection, has been dishonoured.

Problem No. 38

Journalise the following transactions in the books of Ranbir. [Ans]

  1. Sonam informs Ranbir that Salman’s acceptance for Rs. 3,200, endorsed to Sonam, has been dishonoured, and the noting charges amounted to Rs. 80.
  2. Ravindra renews his acceptance to Ranbir for Rs. 4,800 by paying Rs. 1,800 in cash and accepting a fresh bill for the balance, plus interest at 12% p.a. for 2 months.
  3. Dilip’s acceptance to Ranbir for Rs. 8,000 is retired one month before the due date at a discount of 12% p.a.
  4. The bank informs Ranbir that Shirin’s acceptance for Rs. 5,500, discounted with the bank earlier, has been dishonoured, and the noting charges are Rs. 100.

Problem No. 39

Journalise the following transactions in the books of Kedarnath: [Ans]

  1. Badrinath informs Kedarnath that Aloknath's acceptance of Rs. 16,000, endorsed to Badrinath, has been dishonoured and noting charges amounted to Rs. 500.
  2. Somnath renews his acceptance of Rs. 14,400 to Kedarnath by paying cash of Rs. 4,400 and accepting a new bill for 2 months for the balance plus interest at 12% p.a.
  3. Vishwanath retired his acceptance for Rs. 10,500 to Kedarnath by paying Rs. 10,250 in cash.
  4. Recovered only 50% of the amount due from the private estate of Ramnath, who was declared insolvent, against his bill of Rs. 12,500.
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