Bills of Exchange & Goods on Approval or Return Basis -Practice Problems

7/30/2019 Bills of Exchange & Goods on Approval or Return Basis -Practice Problems

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FINPREP Practice Problems

Chapter Name Bills of exchange & Goods on approval or return basic

Chapter No. 9

For Private Circulation to registered students. Page 1 of 15

FINPREPA CPT preparatory program from

Practice Problems

Subject: Accounting


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Chapter No. 9


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Chapter No. 9


Bills of Exchange

7.3.1. Introduction1. A bill given to a creditor is called ___________

a) Bills Receivableb) Bills Payablec) Purchase Invoiced) Sales Invoice

7.3.2. Promissory note (P/N)2. A Promissory Note is ______

a) A conditional promise to payb) An unconditional promise to payc) A conditional order to payd) An unconditional order to pay

3. From the following information, find out who can draw the bill if Mr. A sold goods to B:a) A will draw a bill on Bb) B will draw a bill on Ac) Noned) Third party will draw a bill on A

4. The Promissory Note should be signed by:a) Drawerb) Draweec) Payeed) Promissor

7.3.3. Bills of Exchange (B/E)5. A Bill of Exchange is _________

a) A conditional promise to payb) An unconditional promise to payc) A conditional order to payd) An unconditional order to pay

6. Out of the following bills, bill at sight is ______a) Pay B Rs.500 on presentmentb) Pay B Rs.500 after sightc) Pay B Rs.500 after 3 monthsd) None of these


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Chapter No. 9


7. The term of a bill after sight commences __________a) From the date of acceptance of the billb) From the date of drawing a billc) From the date of receipt of the accepted billd) From the date of receipt of drawn bill

8. A bill drawn on 23.11.2005 as payable 2 months after date was accepted on 24.11.2005. thedate of maturity of the bill will be

a) 25.1.2006b) 26.1.2006c) 27.1.2006d) None of these

9. Under which circumstances drawer and payee as same person:a) When drawer discounted the bill with bankerb) When drawer endorse the bill to the third partyc) When drawer held the bill till maturityd) When drawee rejects to accept the bill

7.3.4. Foreign Bill10.Which of the following is not a foreign bill?

a) A bill drawn in India, on a person resident outside India and made payable outside Indiab) A bill drawn outside India, on a person resident outside Indiac) A bill drawn outside India, made payable in Indiad) A bill drawn on a person resident in India and made payable in India

7.3.5. Maturity date for P/N and B/E11.A bill drawn on 23.11.2005 as payable 2 months after sight was accepted on 24.11.2005. the

date of maturity of this bill will be


12.A bill drawn on 23.11.2005 as payable 60 days after sight was accepted on 24.11.2005. the dateof maturity of this bill will be



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Chapter No. 9


13.On 1.8.07, X drew a bill on Y for 30 days after sight. The date of acceptance is 8.8.07. the duedate of the bill will be:a) 8.9.07b) 10.9.07c) 11.9.07d) 9.9.07

14.On 18.2.07, A drew a bill on B for Rs.10,000. B accepted the bill on 21.2.07. The bill is drawn for30 days after sight. The due date of the bill will be :

a) 24.3.07b) 22.3.07c) 26.3.07d) 21.3.07

15.A bill is drawn on 29th Jan 07, for 1 month after date. The date of acceptance is 2nd Feb 2007. Thebill is drawn on 1 month after date basis. The due date of the bill will be:

a) 28th Febb) 1st Marchc) 2nd Marchd) 3rd March

7.3.6. Dishonour of B/E - Noting charges16. In case of dishonour of a discounted bill, noting changes are initially paid by

a) Drawerb) Draweec) Bankerd) None of these

17. In case of dishonour of a bill sent for collection to a banker, the noting charges are initially paidby ----

a) Drawerb) Draweec) Bankerd) None of these

18.Which of the following is correct for presenting bill to notary public:a) To pay fees to notary publicb) For bill for collectionc) If the acceptor can prove that the bill was not properly presented to him for payment, he

can escape the liability hence for dishonour it is produced.

d) For drawing a fresh bill


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Chapter No. 9


19.Fees paid in cash to Notary Public is charged bya) Drawerb) Draweec) Holder of bill of exchanged) None

7.3.7.Renewal of B/E20.When a bill is renewed-

a) Entries for cancellation of old bill and for recording new bill are requiredb) Only the entries for cancellation of old bill are requiredc) Only the entries for recording new bill are requiredd) None of these

7.3.8. Retirement of B/E21.Discount at the time of retirement of a bill is-

a) A gain for the draweeb) A gain for the drawerc) A loss for the draweed) None of these

7.3.10. Accommodation bills22.The purpose of accommodation is-

a) To finance actual purchase or sale of goodsb) To facilitate trade transmissionc) When both parties are in need of fundsd) At will

7.3.12. Journal entries in the books of drawer23.When the bill honoured at the maturity date, the drawee debits _______

a) Drawers Accountb) Bills payable Accountc) Cash/Bank Accountd) Holder of Bill Account (Banker/Endorsee)


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7.3.14. Bills Receivable Book and Bills Payable Book24.Total of Bills Payable Journal is posted to the ______

a) Credit of Bills Receivable A/cb) Credit of a Bills Payable A/cc) Credit of Drawers A/cd) Credit ofDrawees A/c

7.3.15. Worked out examples25.X sold goods to Y for Rs.2,00,000. Y paid cash Rs.50,000. X will grant 2% discount on balance and

Y requests X to draw a bill for balance, the amount of bill will be:

a) Rs.2,00,000b) Rs.1,96,000c) Rs.1,50,000d) Rs.1,47,000

26.X sold goods to Y for Rs.2,00,000. of the amount will be received in cash and balance in B/R.For what amount X should draw the bill on Y.

a) Rs.1,00,000b) Rs.2,00,000c) Nild) None

27.A sold goods to B for Rs.1,50,000. A will grant 5% discount to B. B requested A to draw a bill. Theamount of bills will be:

a) Rs.1,50,000b) Rs.1,42,500c) Rs.1,45,000d) Nil

28.On 01.01.07 X draws a bill on Y for Rs. 1,50,000 for 3 months. X got the bill discounted 4.1.07 atrate of 12% p.a. The amount of discount on bill will be:

a) Rs.4,500b) Rs.6,000c) Rs.18,000d) Rs.3,000

29.Mr. A draws a bill on Mr. Y for Rs.1,50,000 on 1.1.07 for 3 months. On 4.2.07 X got the billdiscounted at the rate of 12% p.a. The amount of discount will be:

a) Rs.3,000b) Rs.4,000c) Rs.12,000d) Rs.2,000


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30.X got Ys acceptance for Rs.1,50,000 discounted at 2 months at 12% p.a. The amount of discountwill be:

a) Rs.3,000b) Rs.1,500c) Rs.4,500d) Nil

31.X draws a bill on Y for Rs.1,50,000 for 3 months on 1.1.07. The bill is discounted with banker at acharge of Rs.4,500. At maturity the bill return dishonoured. In the books of X, for dishonour, the

bank account will be credited by:

a) Rs.1,45,500b) Rs.1,50,000c) Rs.1,54,500d) None of these

32.A bill of Rs.1,50,000 was discounted by A with the banker of Rs.1,45,500. At maturity, the billreturned dishonoured, noting charges Rs.200. How much amount will the bank deduct from As

bank balance at the time of such dishonour?

a) Rs.1,45,500b) Rs.1,45,700c) Rs.1,50,000d) Rs.1,50,200

33.X draws a bill in Y and got the bill discounted with the Bank. Y will pay the amount of the bill to:a) Xb) Himselfc) Bankerd) None

34.On 1.1.07 X drew a bill on Y for Rs.1,50,000. At maturity, the bill returned dishonoured as Ybecome insolvent and 40 paisa per rupee is recovered from his estate. The amount recovered is:

a) Rs.60,000b) Rs.1,50,000c) Rs.99,000d) None

35.A draws a bill on B for Rs.1,50,000 for 3 months. At maturity, the bill returned dishonoured,noting charges Rs.1500. 40 Paisa in a rupee is recovered from Bs estate. The amount of

deficiency to be recorded on insolvency in the books of B will be:

a) Rs.60,600b) Rs.90,900c) Rs.58,400d) Rs.57,000


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36.X sold goods to Y for Rs. 1,50,000 on 1.5.07. On the same day, he drew on Y a bill for the amountfor 3 months, which Y duly accepted. X got the bill discounted with the Bank before the due

date, Y became insolvent. Later, his estate could pay only 40% of the amount due. What will be

the amount of deficiency in the books of Y?

a) Rs.60,000b) Rs.1,50,000c) Rs.90,000d) None of these

37.X draws a bill on Y. X endorsed the bill to Z. The payee of the bill will be:a) Xb) Yc) Zd) None

38.X accepted a bill drawn by Y who endorsed the bill to Z. On the due date, the bill is dishonoured.To record the dishonour of the bill in the books of Y, which of the following accounts should be

credited?

a) Xb) Bills Receivable Accountc) Yd) Bills Payable Account

39. A draws a bill on B for Rs.1,50,000. A endorsed it to C in full settlement of Rs.1,51,000. Notingcharges of Rs.600 as the bill returned dishonoured. A wants to pay the amount to C at 2%

discount. The amount to be paid by A to C will be:

a) Rs.1,37,000b) Rs.1,38,470c) Rs.1,49,058d) Rs.1,51,500

40.A draws a bill on B for Rs.1,50,000. A endorsed the bill to C. The bill returned dishonoured.Noting Charges Rs.1500. B request A to accept the amount at 2% discount by a single cheque.

The cheque amount will be:

a) Rs.1,47,000b) Rs.1,48,470c) Rs.1,49,500d) Rs.1,51,470


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41.A draws a bill on B for Rs.1,50,000. A wants to endorse it to C in settlement of Rs.1,75,000 at 2%discount with the help of Bs acceptance and balance in cash. How much cash A will pay to B?

a) Rs.21,500b) Rs.20,000c) Rs.20,500d) Rs.25,000

42.X drew a bill on Y for Rs.3,000. X endorsed it to Z who endorsed it to W. The payee of the bill willbe:

a) Xb) Yc) Zd) W


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Chapter No. 9


Goods on Approval or Sale or Return Basis

7.4.1 Basics:43.Under sales on return or approval basis, the ownership of goods is passed only

a) When the retailer gives his approvalb) If the goods are not returned within specified periodc) Both (a) & (b)d) None of the above

44.Under sales on returned or approval basis, when transactions are few, the seller, while sendingthe goods, treats them as

a) An ordinary sale but no entry is passed in the booksb) An ordinary sale and entry for normal sale is passed in the booksc) Approval sale and no entry is passedd) None of these

7.4.2 Accounting for goods sent on approval or return basis:45.On 31st December 2006, goods sold at a sale price of Rs.60,000 were lying with customer,

Mohan to whom these goods were sold on sale or return basis and recorded as actual sales.

Since no consent was received from Mohan, the adjustment entry was made presuming goods

were sent n approval at a profit of cost plus 20%. In the balance sheet, the stock with

customers account will be shown at

a) Rs.60,000b) Rs.48,000c) Rs.40,000d) Rs.50,000

46.A sent some goods costing Rs.10,500 at a profit of 25% on sale to B on sale or return basis. Breturned goods costing Rs.2,400. At the end of the accounting period i.e., on 31

st

December,2007, the remaining goods were neither returned nor were approved by him. The

stock on approval will be shown in the balance sheet at

a) Rs.6,000b) Rs.8,100c) Rs.6,075d) Rs.10,500


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47.The merchant sends out his goods casually to his dealers on approval basis. All such transactionsare, however, recorded as actual sales and are passed through the sales book. On 31.12.2006, it

was found that 100 articles at a sale price of Rs.400 each sent on approval basis were recorded

as actual sales at that price. The sale price was made at cost plus 25%. The amount of stock on

approval will be

a) Rs.32,000b) Rs.40,000c) Rs.30,000d) None of these

48.The X sends goods on approval basis as follows :The stock of goods sent on approval basis on 31

stJanuary will be:

Date

January, 2006

Customers

Name

Sale price of

Goods Sent

Rs.

Goods Accepted

Rs.

Goods Returned

Rs.

9 A 10,000 8,000 2,000

11 B 9,000 9,000 -----

16 C 8,000 ------ 8,000

23 D 9,000 2,000 7,000

The stock of goods sent on approval basis on 31st January will be

a) Rs.2,000b) Nilc) Rs.7,000d) None of the above

49.A company sends his cars to dealers on sale or return basis. All such transactions are howevertreated like actual sales and are passed through the sales day book. Just before the end of thefinancial year, two cars which costs Rs.50,000 each have been sent on sale or return basis and

have been debited to customers at Rs.60,000 each, cost of goods lying with the customers will

be:

a) Rs.1,00,000b) Rs.1,20,000c) Rs.60,000d) None of these

7.4.2.1 Goods are sent casually:50.Under Sales or Return or Approval basis when the transactions are few and the seller sends the

goods on approval or return basis, the accounting treatment will be

a) No Journal Entryb) Entry in Sales or Return Journalc) Entry in Sales or Return Day bookd) Sundry Debtors A/c Dr.

To Sales A/c


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51.Under Sales on return or approval basis when the transactions are few and the customeraccepts the goods, the accounting treatment will be


To Sales A/c

52.Under Sales on Return or Approval basis when the transactions are few and the seller at the endof the accounting year reverse the sale entry, then what will be the accounting treatment for

the goods returned by the customers on a subsequent date?

a) No entry will be passed for such return of goodsb) Entry for return of goods is passed by the sellerc) Only the stock account will be adjustedd) None of these

7.4.2.2 Goods are sent frequently, but not numerously:53.Under Sale or Return or Approval basis when the transactions are moderate and the seller

sends the goods on approval or return basis, the accounting treatment will be


To Sales A/c

54.Which of the following is not a main column of sales or return journal?a) Goods sent on approval columnb) Goods returned columnc) Goods approved columnd) Purchase column

55.When Sales or Return Journal is maintained, a journal entry is passed for :a) Goods deliveredb) Goods returnedc) Goods approvedd) None of these

7.4.2.3 Goods are sent frequently and numerously56.Under Sale or Return or Approval basis when the transactions are large and the seller sends the

goods on approval or return basis, the accounting treatment will be


To Sales A/c


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57.Sale or Return Day Book and Sale or Return Ledger are known as,a) Principal Booksb) Subsidiary Booksc) Memorandum Booksd) None of these

58. In the Sale or Return Ledgera) All the customers are individually debited and the sale or return account is credited with the

periodical total of the Sale or Return Day Book

b) All the customers are debited in total and the sale or return account is credited with theperiodical total of the Sale or Return Day Book

c) All the customers are individually debited and the sale or return account is also creditedwith the individual total of the Sale or Return Day Book

d) None of these59.When Sale or Return Day Book and Sale or Return Ledger are maintained and the goods are

sent to the customers on sale or return basis, these are recorded:

a) Initially in the Sale or Return Day Book. Thereafter in the Sale or Return Ledger.b) Only in the Sales or Return Day Bookc) Only in the Sale Day Bookd) Both in Sale or Return Day Book and Sales Day Book

60.When the goods are returned by customers within the specified time, they are recordeda) Initially in the Sale or Returned Ledger. Thereafter in the Sale or Return Day Book.b) Initially in the Sale or Return Day Book. Thereafter in the Sale or Returned Ledger.c) Only in the Sale or Returned Day Book.d) Only in the Sale or Returned Ledger.

61.When Sale or Return Day Book and Sale or Return Ledger are maintained and the goods areapproved by the customers, these are recorded:

a) Initially in the Sale or Return Day Book. Thereafter in the Sale or Returned Ledger.b) Only in the Sale or Returned Day Bookc) Only in the Sales Day Bookd) Both in Sales or Return Day Book and Sales Day Book

62.When a large number of articles are sent on a sale or return basis, it is necessary to maintaina) Sales Journalb) Goods returned journalc) Sale or Return Journald) None of these


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Chapter No. 9


Answers

1. B2. B3. A4. D5. D6. A7. A8. A9. C10.D11.C12.A13.B14.C15.

D

16.C17.C18.C19.C20.A21.A

22.C23.B24.B25.D26.A27.B28.A29.A30.A31.B32.D33.C34.A35.B36.

C

37.C38.C39.C40.B41.A42.D

43.C44.B45.D46.B47.A48.B49.A50.D51.A52.A53.B54.D55.C56.C57.

C

58.A59.A60.B61.D62.C

Bills of Exchange & Goods on Approval or Return Basis -Practice Problems

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