Class 11 Accountancy: Bills of Exchange Questions & Solutions

Overview: The bills of exchange for CBSE Class 11 have played a pivotal role in finance and commerce, providing a mechanism for deferred payments and risk management. Let's explore the intricacies of this financial instrument further.

Understanding and learning all the important topics and concepts is essential for students to acquire good exam scores. The Bills of Exchange topic weighs 8 marks in the class 11 accountancy.

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

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Bills of Exchange for Class 11 Accountancy

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 Bills of Exchange

The following features of a bill of exchange emerge out of this definition.

• A bill of exchange must be in writing.
• It is an order to make a payment.
• The order to make payment is unconditional.
• The maker of the bill of exchange must sign it.
• The payment to be made must be certain.
• The date on which payment is made must also be certain.
• The bill of exchange must be payable to a certain person.
• The amount mentioned in the bill of exchange is payable either on demand or on the expiry of a fixed period of time.
• It must be stamped as per the law requirement.

Parties to a Bill of Exchange

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

Party	Role in the Bill of Exchange
Drawer	The person who creates the Bill of Exchange.
	The drawer is the one that has extended credit to the person on whom the bill is drawn.
Drawee	The person on whom the Bill of Exchange is drawn and who must accept it.
	The drawee is the debtor who must pay the drawer the money.
Payee	The person named in the Bill of Exchange to whom the amount is to be paid.
	The payee may be the drawer himself or a third party.

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Advantages of Bills of Exchange

• It is helpful for a person to purchase and sell goods on credit and also to avail of the mko discounting facility.
• Legal evidence.
• Endorsement is possible in the bill of exchange.
• It provides relief from sending reminders.
• Helpful in planning cash operations.
• Convenient means of making foreign payments.
• Saving money in circulation-
• Convenience for the purchaser

Promissory Note for CBSE Class 11 Accountancy

The purchaser of the goods or debtor prepares a note, signs it and gives it to the seller of the goods. It is known as a promissory note.

A promissory note is an instrument in writing that consists of an unconditional undertaking duly signed by the maker to pay a certain sum of money to, or to the order of, a certain person. 

Features

• It must be in writing, and the amount to be paid must be specified.
• It must be signed by the bill maker, also known as the promisor.
• The name of the payee must be mentioned in the note.
• It must be duly stamped according to its value per the Stamp Duty Act.

Parties to a Promissory Note

• Maker: Those people who write a promissory note and sign it.
• Payee: Those people who are entitled to get the payment.

Check Out: CBSE Class 12 Commerce Syllabus

Bills of Exchange Questions for Class 11 Accountancy

To help you understand 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: drawer, payee, and drawee.	It involves two parties: the payee and the 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 expiration date should be mentioned in the exchange bill.

Check Out: Class 12 Accountancy Syllabus 2025

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

A situation in which the drawee of the bill of exchange cannot process the payment as per the bill's maturity date is known as dishonour of the bill of exchange.

This re-establishes the acceptor's liability and makes him/her a debtor again. The receipt of the bill of exchange should be reversed to reflect the changes.

Q5. Name the parties to a promissory note

Two parties are involved in a promissory note:

• The maker/Drawer, also known as the promisor, is the maker of the note and is responsible for paying the sum mentioned on the promissory note.
• Promisee or Payee is the one who will be receiving the payment.

Q6. Distinguish between a bill of exchange and a 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: the 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 the payee and drawer	Promissory and Payee cannot be the same
Noting in case of dishonour	Dishonoring of the instrument leads to noting of the bill	No requirement to noting
Liability	Liability does not rest with the drawer primarily	Promissory is primarily responsible

Accounting Problems with Solutions for Bills of Exchange for Class 11

Solving the previous year's Class 11 Accountancy Sample Papers will help you understand the difficulty level and the type of questions asked in the exam. The following are some 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 Rao's books and prepare Rao’s account in Reddy's books.

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

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Q2. 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)

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Key Takeaways

• Bills of exchange have been a cornerstone of commercial transactions for centuries. They offer a structured and secure method for facilitating credit and trade.
• Students can develop a strong foundation in financial management by understanding the intricacies of bills of exchange, including the roles of different parties, the process of acceptance, negotiation, and discounting.
• While the digital age has introduced new payment methods, bills of exchange continue to be relevant in modern business practices.
• A thorough grasp of bills of exchange for Class 11 is crucial for aspiring accountants, bankers, and business professionals.