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)

FAQ's

Which are the best books to study for Class 11 accountancy?

Ultimate book of accountancy, T.S. Grewal Double entry book keeping, Oswal CBSE question bank, CBSE All in one Accountancy class 11 are some good books for accountancy.

What is the best preparation strategy for accountancy?

Regular study, practice questions, solving question papers and not keeping things for the last minute will be the best preparation method for the exam.

Will there be practical problems in the exam?

Yes. Problem based questions can come in the exam. Refer to the tips before the questions in each chapter for topics on which problem based questions can come.

What is the most important thing for problem based questions?

If you have understood the concept for e.g. preparation of a balance sheet, and remember the format you will certainly be able to solve the example.

How many units are there in Class 11 Accountancy Syllabus?

There are a total of four units that are divided into 2 parts:

  • PART A: Financial Accounting - 1: Unit-1: Theoretical Framework; Unit-2: Accounting Process
  • PART B: Financial Accounting - 2: Unit-3: Financial Statements of Sole Proprietorship from Complete and Incomplete Records; Unit-4: Computers in Accounting