NIOS Class 12 Accountancy Chapter 11 Bank Reconciliation Statement

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NIOS Class 12 Accountancy Chapter 11 Bank Reconciliation Statement

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Bank Reconciliation Statement

Chapter: 11

Module – 2: Trial Balance and Computers

INTEXT QUESTIONS 11.1

(i) Acceptance is not required in ___________.

(a) Bill of Exchange.

(b) Promissory Note.

(d) None of the above.

Ans: (b) Promissory Note.

(ii) ___________ prepares the bill of exchange.

(a) Drawer.

(b) Drawee.

(d) Bank.

Ans: (a) Drawer.

(iii) Payment of the bill is made to ___________.

(a) Drawee.

(b) Endorsee.

(d) Bank.

Ans: (c) Payee.

INTEXT QUESTIONS 11.2

I. Choose the correct option from the following alternatives

(i) Which account is debited in the books of drawer when a bill is drawn?

(a) Endorsee.

(b) Bills Receivable.

(d) Bank.

Ans: (b) Bills Receivable.

(ii) When the acceptor pays the bill amount, which account is credited in the books of drawee?

(a) Bills Payable.

(b) Bills Receivable.

(d) None of the above.

Ans: (c) Bank.

II. Fill in the blanks with correct word:

(i) The status of acceptor of a bill is that of a ___________.

(a) Debtor.

(b) Creditor.

(d) None of the above.

Ans: (a) Debtor.

(ii) The drawer of a bill of exchange is the ___________.

(a) Debtor.

(b) Creditor.

(d) All of the above.

Ans: (b) Creditor.

(iii) ___________ is the person to whom payment is made.

(a) Buyer.

(b) Drawee.

(d) None of the above.

Ans: (c) Payee.

INTEXT QUESTIONS 11.3

(i) Acceptance is not required in ___________.

(a) Bill of Exchange.

(b) Promissory Note.

(d) None of the above.

Ans: (b) Promissory Note.

(ii) ___________ prepares the bill of exchange.

(a) Drawer.

(b) Drawee.

(d) Bank.

Ans: (a) Drawer.

(iii) Payment of the bill is made to ___________.

(a) Drawee.

(b) Endorsee.

(d) Bank.

Ans: (c) Payee.

(iv) The number of days allowed as Days of Grace of Bill of Exchange is ___________.

(a) One.

(b) Two.

(d) Five.

Ans: (c) Three.

(v) When the amount in a bill of exchange is received from the bank on a date earlier than the due date, it is called ___________.

(a) Retiring the bill.

(b) Renewing the bill.

(d) None of the above.

Ans: (c) Discounting the bill.

(vi) The process in which the drawer puts his signature in the bill indicating that the bill should be paid to the person whose name is written at the back of bill is called ___________.

(a) Discounting the bill.

(b) Endorsing the bill.

(d) Renewing the bill.

Ans: (b) Endorsing the bill.

INTEXT QUESTIONS 11.4

(i) ___________ account is debited in the books of drawer when bill is duly met and the bill is retained up to the maturity date.

(a) Cash.

(b) Cash and Discount.

(d) Bills Receivable.

Ans: (a) Cash.

(ii) In the books of endorsee when endorsement occurs, ___________ account is credited.

(a) Bills Receivable.

(b) Bills Payable.

(d) Endorser.

Ans: (b) Bills Payable.

(iii) The balance in the Bills Sent for Collection Account is shown in Balance Sheet as ___________.

(a) Asset.

(b) Liability.

(d) None of the above.

Ans: (d) None of the above.

(iv) If the payment of the bill is not made on the due date, it is called ___________.

(a) Discounting the bill.

(b) Dishonour of a bill.

(d) Renewal of a bill.

Ans: (b) Dishonour of a bill.

(v) In the books of drawer, when a bill is dishonoured ___________ account is debited.

(a) Drawee’s.

(b) Cash.

(d) None of the above.

Ans: (a) Drawee’s.

(vi) When the acceptor requests the holder to extend the period of bill, it is called ___________.

(a) Retiring the bill.

(b) Discounting the bill.

(d) Endorsing the bill.

Ans: (c) Renewing the bill.

TERMINAL EXERCISE

1. What do you mean by a Bill of Exchange? Distinguish between Bill of Exchange and Promissory Note.

Ans: According to section 5 of the Negotiable Instruments Act, 1881, a bill of exchange is an instrument is 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.

Bill of Exchange	Promissory Note
(i) It contains an order to pay.	(i) It contains a promise to pay.
(ii) It requires acceptance.	(ii) It does not need acceptance.
(iii) Creditor is the drawer.	(iii) Debtor is the drawer.
(iv) The liability of the drawer arises only if the acceptor does not pay.	(iv) The promisor has the primary liability to pay.
(v) The drawer and payee are generally the same parties. Acceptor and drawee is the same party.	(v) Drawee and payee are the parties.

2. Define Bill of Exchange. What are the features of Bill of Exchange?

Ans: According to Section 5 of the Negotiable Instruments Act, 1881, 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.

Features of Bill of Exchange:

(i) It is an instrument drawn by the creditor upon his debtor.

(ii) It contains an unconditional order to pay a specified amount.

(iii) The specified amount is payable to the person named in the bill or to his order or to the bearer.

(iv) The bill must be signed/accepted by the maker.

(v) The bill specifies the date by which the amount should be paid.

(vi) It can be payable to the bearer.

3. Explain Bill of Exchange along with its advantages and disadvantages.

Ans: A Bill of Exchange is a written instrument containing an unconditional order, signed by the drawer, directing a certain person to pay a specified sum of money to a specified person either on demand or after a certain period. It is commonly used in credit transactions and provides a written assurance of payment.

Advantages of Bill of Exchange:

(i) Legal Evidence: It is a legal document and can be used as evidence in case of dispute.

(ii) Certainty of Payment: It clearly specifies the amount and due date, ensuring certainty of payment.

(iii) Credit Facility: It facilitates credit transactions between buyer and seller.

(iv) Transferability: It can be transferred to others by endorsement.

(v) Discounting Facility: It can be discounted with a bank to get immediate cash.

(vi) Easy Recovery: In case of non-payment, legal action can be taken easily.

Disadvantages of Bill of Exchange:

(i) Risk of Dishonour: The bill may not be honoured on the due date.

(ii) Formalities Required: It requires proper drafting, stamping, and acceptance.

(iii) Cost Involved: Stamp duty and other charges are involved.

(iv) Delay in Payment: Payment is received only after a certain period.

(v) Dependence on Creditworthiness: Its acceptance depends on the financial position of the drawee.

4. Who are the parties to a Bill of Exchange? Explain them.

Ans: The following are the parties to a Bill of Exchange:

(i) Drawer: Drawer is a person who writes or makes the Bill of Exchange. He is generally the creditor who has sold goods on credit.

(ii) Drawee: Drawee is a person upon whom the bill is drawn. He is generally the debtor to whom goods have been sold on credit. The bill is generally signed and accepted by the drawee.

(iii) Acceptor: He is the person who accepts the bill of exchange. Generally, the drawee himself becomes the acceptor, but sometimes another person may accept the bill on behalf of the drawee. Normally, the drawee and acceptor are the same parties.

(iv) Payee: Payee is the person named in the Bill of Exchange to whom the payment is to be made. In most cases, the drawer and the payee are the same person.

5. Explain the following terms:

(i) Renewal of a Bill.

Ans: When the acceptor of a bill is not in a position to meet the bill on due date, he may, with the consent of the holder accept a fresh bill in place of the old bill, it is called Renewal of a Bill. The fresh bill may include interest for the extended period (or it may be paid separately), stamp duty and other incidental expenses incurred by the holder.

(ii) Retirement of a Bill.

Ans: When the Drawee pays the bill before its due date, it is called Retirement of a Bill. The holder allows him a rebate of certain amount calculated at a certain rate per cent per annum, from the date of retirement to the date of maturity.

(iii) Noting Charges.

Ans: Noting Charges is the fee paid to the Notary Public for noting and protesting the Bill of Exchange of it’s dishonour.

(iv) Days of Grace.

Ans: To ascertain the period of the bill, three extra days are added, which can be called as ‘Days of Grace’ to calculate the date of maturity.

6. What is meant by a Promissory Note? Describe the parties to a Promissory Note.

Ans: According to Section 4 of the Negotiable Instruments Act, 1881, a Promissory Note is an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking signed by the maker to pay a certain sum of money only to, or to the order of, a certain person.

It is an unconditional written promise made by one person to pay a specified amount to another person.

Parties to a Promissory Note:

(i) Drawer (Maker): He is the person who makes the promise to pay the amount. He is the debtor.

(ii) Drawee: He is the person in whose favour the promissory note is drawn. Generally, he is the creditor. In a promissory note, the drawee and payee are the same parties.

(iii) Payee: The payee is the person to whom payment is to be made. He is the creditor.

7. Briefly explain the characteristics of a Promissory Note.

Ans: The following are the characteristics of a Promissory Note:

(i) It is an unconditional written undertaking to pay the specified amount.

(ii) It is drawn and signed by the maker or promisor.

(iii) It specifies the name of the payee.

(iv) The specified amount is payable to the person named or to his order or to the bearer.

(v) Proper stamp duty is paid on the Promissory Note.

(vi) It is not payable to the bearer.

8.On 1st January, 2008, A sold goods to B for ₹5,000 and drew upon him a bill for this amount payable 3 months after date. The bill was duly accepted by B. A retained the bill till due date. On the due date, the bill was paid. Pass the Journal entries in the books of A and B. Also, show the necessary accounts in the books of both parties.

Ans: In the Books of A (Drawer)

Journal

Date	Particulars	Dr. (₹)	Cr. (₹)
Jan 1	B A/c Dr.	5,000
	To Sales A/c		5,000
	(Being goods sold to B)
Jan 1	Bills Receivable A/c Dr.	5,000
	To B A/c		5,000
	(Being bill accepted by B)
Apr 4	Cash A/c Dr.	5,000
	To Bills Receivable A/c		5,000
	(Being bill paid on due date)

Ledger

B A/C

Dr.	Amount (₹)	Cr.	Amount (₹)
To Sales A/c	5,000	By Bills Receivable A/c	5,000
Total	5,000	Total	5,000

Bills Receivable A/c

Dr.	Amount (₹)	Cr.	Amount (₹)
To B A/c	5,000	By Cash A/c	5,000
Total	5,000	Total	5,000

In the Books of B (Drawee)

Journal

Date	Particulars	Dr. (₹)	Cr. (₹)
Jan 1	Purchases A/c Dr.	5,000
	To A A/c		5,000
	(Being goods purchased)
Jan 1	A A/c Dr.	5,000
	To Bills Payable A/c		5,000
	(Being bill accepted)
Apr 4	Bills Payable A/c Dr.	5,000
	To Cash A/c		5,000
	(Being bill paid on due date)