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Accountancy · Class 12 Commerce

Ch 1Bills of Exchange — Class 12 Accountancy, concept-first.

A bill of exchange is one of the oldest and most widely used negotiable instruments in trade and commerce, allowing a seller to obtain a firm, legally enforceable promise of payment from a buyer instead of relying on an open, unsecured credit balance.

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Key concepts

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Bill of Exchange — Meaning and Parties

A bill of exchange is a written, signed, unconditional order by which one person (the drawer) directs another (the drawee) to pay a certain sum of money to a third person (the payee) or to bearer, on demand or at a fixed…

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Chapter contents

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1

Meaning and Definition of a Bill of Exchange

A bill of exchange is one of the oldest and most widely used negotiable instruments in trade and commerce, allowing a seller to obtain a firm, legally enforceable promise of payment from a buyer inste…

2

Parties to a Bill of Exchange

Every bill of exchange, at the moment it is drawn, involves at least three parties, though the same person may occupy more than one role as the bill moves through its life.

3

Term of the Bill, Days of Grace and Due Date

The 'term' of a bill is the period between the date it is drawn and the date it is expressed to fall due — for example, three months after date, or 60 days after sight.

4

Honour and Dishonour of a Bill

A bill is said to be honoured when the drawee (acceptor) pays the full amount to the holder on the due date, on presentment of the bill.

5

Renewal and Retirement of a Bill

Both renewal and retirement are adjustments made to a bill before its original due date arrives, but they move in opposite directions.

6

Endorsement and Discounting of a Bill

A holder of a bill does not have to wait until the due date to get value from it — two common ways of using a bill before maturity are endorsement and discounting.

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Accommodation Bills

Every bill discussed so far has arisen out of a genuine sale of goods. An accommodation bill is different: it is drawn and accepted without any real underlying trade transaction, purely to help one or…

8

Accounting Treatment — Summary of Journal Entries

Having worked through each situation individually, it helps to see every standard journal-entry pattern side by side, in both the drawer's and the drawee's books, as a single quick-reference table bef…

Exercises

+Show 3 questions3 questions
  1. Q10State the meaning of a bill of exchange, as recognised under the Negotiable Instruments Act, 1881, and list its essential elements.Free
  2. Q11Distinguish between renewal and retirement of a bill of exchange.Preview
  3. Q12What is meant by 'noting' of a bill? Explain the role of a Notary Public and the treatment of noting charges in the books of account.Preview

Sample & Board Papers

Sample papers and previous-year board questions for this subject.

+Show 8 questions8 questions
  1. Q1Satyam sold goods to Sivam worth ₹ 9,000 on 1st June, 2013 and drew a bill for 2 months for the same amount. Sivam accepted the bill and ret…Preview
  2. Q2Write a short note on: Days of Grace.Preview
  3. Q3On 1st January, 2017 Vyshnavi sold goods to Sujatha worth ₹ 8,000 and drew a bill on Sujatha payable after three months. After securing Suja…Preview
  4. Q4What do you mean by Noting charges ?Preview
  5. Q5On 1st January 2013, Sankar sold goods worth ₹ 20,000 to Bhaskar on credit and drew a bill for 3 months for the same amount. Bhaskar accepte…Preview
  6. Q6What do you mean by Noting Charges ?Preview
  7. Q7Satyam sold goods to Sivam worth ₹ 9000 on 1st June 2022 and drew a bill for 2 months for the same amount. Sivam accepted the bill and retur…Preview
  8. Q8State the 3 parties in a bill of exchange.Preview

More questions

+Show 9 questions9 questions
  1. Q1A bill of exchange dated 10th January 2024 is drawn for a term of 3 months. Ascertain the due date of the bill, assuming the calculated date…Free
  2. Q2A bill dated 5th March 2024 is made payable 60 days after date. Calculate its due date.Free
  3. Q3On 1st January 2024, Krishna sold goods to Prasad for ₹20,000 on credit. On the same day, Krishna drew a bill on Prasad for the amount, paya…Free
  4. Q4Sudha drew a bill on Ramesh for ₹15,000, payable 2 months after date, for goods sold. Ramesh accepted the bill. On the due date, the bill wa…Preview
  5. Q5Bhanu accepted a bill for ₹10,000 drawn by Girish, payable 3 months after date. One month before the due date, Bhanu requested Girish to can…Preview
  6. Q6Deepika's acceptance for ₹12,000, payable 3 months after date, was held by Naveen. One month before the due date, Deepika retired the bill b…Preview
  7. Q7Sunitha received a bill of ₹8,000 accepted by Vinay. Sunitha owed ₹8,000 to her supplier, Ravi Kumar, and endorsed the bill to him in full s…Preview
  8. Q8Harika received a bill for ₹25,000 accepted by Chandu, payable 3 months after date. Harika immediately discounted the bill with her bank at…Preview
  9. Q9Kiran and Mahesh agreed to a mutual accommodation. Kiran drew a bill for ₹20,000 on Mahesh, payable 3 months after date, purely for financia…Preview