Skip to content

CMA Foundation · Fundamentals of Financial and Cost Accounting · Bills of Exchange

Rohan Traders draws a three-month bill on Mehta & Co. for ₹60,000, and Mehta & Co. accepts it. Rohan Traders keeps the bill with itself until the due date. Which statement correctly describes the position of Rohan Traders during this period?

The drawer who retains an accepted bill records it as Bills Receivable, an asset, because it will receive the amount from the acceptor on maturity. The same bill is Bills Payable only in the acceptor's books. Retaining does not create a bad debt or remove the need for an entry.

  1. AThe bill is a Bills Receivable in its books until maturityCorrect
  2. BThe bill is a Bills Payable in its books until maturity
  3. CThe bill is recorded as a bad debt until maturity
  4. DNo entry is required because the bill has not yet matured

Explanation

The drawer who holds an accepted bill has a right to receive money from the acceptor, so it is an asset called Bills Receivable. Bills Payable is the acceptor's liability, so option B reverses the parties. Retaining a bill does not make it a bad debt, and an entry is needed on acceptance.

Did you get it right without looking?

One question tells you little. A timed set on Bills of Exchange shows your real accuracy, how long you take and where you lose marks.

Practise Bills of ExchangeFree diagnostic mock

More Bills of Exchange questions