Bills of Exchange Class 11

A bill of exchange is an instrument in writing containing an unconditional order signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument. Bills of Exchange topic holds a weightage of 8 marks in the class 11 accountancy.

To help you better understand about the Accountancy Bills of Exchange Class 11 chapter, we have provided features, importance of bills of exchange, and frequently asked questions in this post.

Features of Bills of Exchange

The main features of accounting for bills of exchange class 11 are as follows:

• Bill of exchange is a written order
• The bill must be signed by both the drawee and drawer
• It must contain a confirm order to make payment
• It specifies the date by which the amount should be paid
• The specified amount must be paid on demand
• The bill of exchange amount should be definite

Parties to a Bill of Exchange

Accounts class 11 bills of exchange has three parties and those are listed below:

Drawer

• He is the person who makes the Bill of Exchange. 
• Drawer is the person who has granted credir to the person on whom the bill of exchange is drawn

Drawee

• He is the person on whom the boill of exchange is drawn, for his acceptance.
• Drawee is the debtor who has to pay the money to the drawer.

Payee

• Payee is the person named in the Bill of Exchange to whom the amount is to be paid.
• Payee may be the drawer himself or a third person.

Bills of Exchange Questions for Class 11 Accountancy

To help you get an idea about the type of questions that will be asked in the exam, we have provided some Class 11 Accountancy Important Questions for Bills of Exchange here.

Q1. Name any two types of commonly used negotiable instruments.

• Promissory Notes
• Cheques

Q2. Write two points of distinction between bills of exchange and promissory note

Basis of Distinction	Bills of Exchange	Promissory Note
Drawn by	Creditor	Debtor
Parties Involved	Three parties are involved which are drawer, payee and drawee.	It involves two parties which are payee and drawer/maker.

Q3. State any four essential features of the bill of exchange.

The following four features are considered essential for a bill of exchange:

• The bill of exchange must be in writing
• A bill of exchange should contain an unconditional order to pay.
• The drawer of the bill must sign the bill.
• The amount and the expiry date should be mentioned specifically in the bill of exchange.

Q4. What is meant by the dishonor of a bill of exchange?

The situation where the drawee of the bill of exchange is unable to process the payment as per the maturity date of the bill is known as dishonor of the bill of exchange.

With this liability of the acceptor is re-established and he/she becomes a debtor again. To reflect the changes, the receipt of the bill of exchange should be reversed.

Q5. Name the parties to a promissory note

Two parties are involved in a promissory note:

• Maker/Drawer, Also known as promisor, is the one who is the maker of the note and is the one responsible to pay the sum as mentioned on the promissory note.
• Promisee or Payee is the one who will be receiving the payment.

Q6. Distinguish between bill of exchange and promissory note.

Basis of Comparison	Bills of Exchange	Promissory Note
What it contains	It contains an order to pay	It contains a promise to pay
Parties	It involves three parties which are: drawer, payee, and acceptor	It involves two parties and they are: maker/drawer and payee
Drawn by	Creditor	Debtor
Acceptance	Acceptance required by the debtor	Being drawn by promissory, it requires no acceptance
Payee	The same person can be payee and drawer	Promissor and Payee cannot be same
Noting in case of dishonor	Dishonoring of the instrument leads to noting of the bill	No requirement of noting
Liability	Liability does not rest with the drawer primarily	Promissor is primarily responsible

Download Bills of Exchange Class 11 Notes

Accounting for Bills of Exchange Class 11 Solutions

Solving previous year's Class 11 Accountancy Sample Papers will help you know the difficulty level and the type of questions that were asked in the exam. The following are some of the questions for the Bills of Exchange of class 11 accountancy.

Q1. On Jan 01, 2016, Rao sold goods ₹ 10,000 to Reddy. Half of the payment was made immediately and for the remaining half Rao drew a bill of exchange upon Reddy payable after 30 days. Reddy accepted the bill and returned it to Rao. On the due date, Rao presented the bill to Reddy and received the payment. Journalize the above transactions in the books Rao and prepare Rao’s account in the books of Reddy.

The transactions are journalized below:

Books of Rao
Journal
Date	Particulars			L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2016
01 Jan	Reddy		Dr.		10,000
	To Sales A/c					10,000
	(Goods traded to Reddy)
01 Jan	Cash A/c		Dr.		5,000
		To Reddy				5,000
	(Cash received from Reddy)
01 Jan	Bills Receivable A/c		Dr.		5,000
		To Reddy				5,000
	(Bill received for 30 days accepted by Reddy)
03 Feb	Cash A/c		Dr.		5,000
		To Bills Receivable A/c				5,000
	(Reddy’s acceptance met on due date)

Books of Reddy
Rao’s Account
Dr.							Cr.
Date	Particulars	J.F.	Amount (Rs)	Date	Particulars	J.F.	Amount (Rs)
01 Jan	Cash		5,000	2016
01 Jan	Bills Receivable		5,000	01 Jan	Purchases		10,000
			10,000				10,000

2. On Jan 01, 2016, Shankar purchased goods from Parvati for ₹ 8,000 and immediately drew a promissory note in favor of Parvati payable after 3 months. On the date of maturity of the promissory note, the Government of India declared a holiday under the Negotiable Instrument Act 1881. Since Parvati was unaware of the provision of the law regarding the date of maturity of the bill, she handed over the bill to her lawyer, who duly presented the bill and received the payment. The amount of the bill was handed over by the lawyer to Parvati immediately. Record the necessary journal entries in the books of Parvati and Shankar.

The necessary journal entries are as follows:

Books of Parvati
Journal
Date	Particulars				L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2016
01 Jan	Shankar			Dr.		8,000
		To Sales A/c					8,000
	(Sold goods to Shankar)
01 Jan	Bills Receivable A/c			Dr.		8,000
		To Shankar					8,000
	(Shankar sent Promissory Note for three months)
05 Apr	Cash A/c			Dr.		8,000
		To Bills Receivable A/c					8,000
	(Cash received for Promissory Note one day after the Maturity date on account of holiday declared by Govt.)

Books of Shankar
Journal
Date			Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
2016
01 Jan	Purchases A/c			Dr.		8,000
		To Parvati					8,000
	(Goods purchased from Parvati)
01 Jan	Parvati			Dr.		8,000
			To Bills Payable A/c				8,000
	(Promissory note for three months sent to Parvati)
05 Apr	Bills Payable A/c			Dr.		8,000
			To Cash A/c				8,000
	(Cash paid on maturity of the promissory note)

Q3. On Jan. 01, 2016, Arun sold goods for ₹ 30,000 to Sunil. 50% of the payment was made immediately by Sunil on which Arun allowed a cash discount of 2%. For the balance, Sunil drew a promissory note in favor of Arun payable after 20 days. Since the date of maturity of the bill was a public holiday, Arun presented the bill on a day, as per the provisions of the Negotiable Instrument Act which was met by Sunil. State the date on which the bill was presented by Arun for payment and journalize the above transactions in the books of Arun and Sunil.

The transactions are journalized as follows:

Journal Entries in the Books of Arun
Date			Particulars			L.F.	Debit Amount ₹	Credit Amount ₹
2016
01 Jan	Sunil			Dr.			30,000
		To Sales A/c						30,000
	(Goods traded to Sunil)
01 Jan	Cash A/c			Dr.			14,700
	Discount Allowed A/c			Dr.			300
		To Sunil						15,000
	(50% due from Sunil received and 2% Cash Discount allowed to Sunil)
01 Jan	Bills Receivable A/c			Dr.			15,000
		To Sunil						15,000
	(Promissory note established for 20 days from Sunil)
23 Jan	Cash A/c				Dr.		15,000
		To Bills Receivable A/c						15,000
	(Cash received from Sunil before Maturity)

Journal Entries in the Book of Sunil
Date			Particulars		L.F.	Debit ₹	Credit₹
2016
01 Jan	Purchases A/c			Dr.		30,000
		To Arun					30,000
	(Goods purchased from Arun)
01 Jan	Arun			Dr.		15,000
		To Cash A/c					14,700
		To Discount Received A/c					300
	(50% amount due to Arun paid by cheque and 2%  discount allowed by Arun)
01 Jan	Arun			Dr.		15,000
		To Bills Payable A/c					15,000
	(Promissory note issued in favour of Arun for twenty days)
23 Jan	Bills Payable A/c			Dr.		15,000
		To Cash A/c					15,000
	(Promissory note fullfilled one day before the maturity day)