Explain briefly the procedure of calculating the date of maturity of a bill of exchange? Give example.
The term maturity refers to the date on which a bill of exchange of a promissory note becomes due for payment. In arriving at the maturity date three days, known as days of grace, must be added to the date on which the period of credit expires i.e., instrument is payable e.g., if a bill dated March 15 is payable 30 days after date it, falls due on April 17, i.e. 33 days after March 15 if it were payable one month after date, the due date would be April 18, i.e., one month and 3 days after March 5.
Here, we should remember, that there is difference between one month of 30 days, when 30 days are given, we have to count 3 days above 30 days and where one month is given, we count 3 days of grace over a month as it is illustrated in the above example, where one month end on 15 April and date of maturity is 18 April in spite of 17 April. However, where the date of maturity is a public holiday, the instrument will become due on the preceding business day. In this case, if April 18 falls on a public holiday, then April 17 will be the maturity date.
But when an emergent holiday is declared under the Negotiable Instruments Act 1881, by the Government of India which may happen to be the date of maturity of a bill of exchange, then the date of maturity will be the next working day immediately after the holiday. e.g., the Government declared a holiday on April 18 which happened to be the day on which a bill of exchange drawn by Gupta upon Verma for Rs. 20,000 became due for payment. Since, April 18 has been declared a holiday under the Negotiable Instruments Act. Therefore, April 19 will be the date of maturity for this bill.
Fill in the blanks:
(i) A bill of exchange is a __________ instrument.
(ii) A bill of exchange is drawn by the __________ upon his __________.
(iii) A promissory note is drawn by __________ in favour of his __________.
(iv) There are __________ parties to a bill of exchange.
(v) There are __________ parties to a promissory note.
(vi) Drawer and __________ can not be the same parties in case of a bill of exchange.
(vii) Bill of exchange in India languages is called __________.
(viii) __________ days of grace are added in terms of the bill to calculate the date of its __________.
Write ‘True’ or ‘False’ against each statement regarding a bill of exchange:
(i) A bill of exchange must be accepted by the payee.
(ii) A bill of exchange is drawn by the creditor.
(iii) A bill of exchange is drawn for all cash transaction.
(iv) A bill payable on demand is called Time bill;
(v) The person to whom payment is to be made in a bill or exchange is called payee.
(vi) A negotiable instrument does not require the signature of its maker.
(vii) The hundi Payable at sight is called Darshani hundi.
(viii) A negotiable instrument is not freely transferable.
(ix) Stamping of promissory note is not mandatory.
(x) The time of payment of a negotiable instrument need not be certain.
Briefly explain the effects of dishonour and noting of a bill of exchange.
Briefly explain the benefits of maintaining a Bills Payable Book and state how is its posting is done in the ledger?
Give the meaning of rebate.
Briefly explain the purpose and benefits of retiring a bill of exchange to the debtor and the creditor.
What is meant by maturity of a bill of exchange?
A bill of exchange must contain “an unconditional promise to pay” Do you agree with a statement?
Give the performa of a Bills Payable Book.
Name the parties to a promissory note.
Why is it necessary to record the adjusting entries in the preparation of final accounts?
State the meaning of incomplete records?
What is ‘Depreciation’?
Briefly state how the cash book is both journal and a ledger.
State the meaning of a trial balance?
State the four basic requirements of a database applications.
Define accounting.
State the different elements of a computer system.
Why is it necessary for accountants to assume that business entity will remain a going concern?
State the need for the preparation of bank reconciliation statement?
If suspense account does not balance off even after rectification of errors it implies that:
(a) There are some one sided errors only in the books yet to be located.
(b) There are no more errors yet to be located.
(c) There are some two sided errors only yet to be located.
(d) There may be both one sided errors and two sided errors yet to be located.
Which stakeholder group... would be most interested in
_____________________________ (a) the VAT and other tax liabilities of the firm
_____________________________ (b) the potential for pay awards and bouns deals
_____________________________ (c) the ethical or environmental activities of the firm
_____________________________ (d) whether the firm has a long-term future
_____________________________ (e) profitability and share performance
_____________________________ (f) the ability of the firm to carry on providing a
service or producing a product.
Give four examples each of ‘revenue reserve’ and ‘capital reserves’.
The realisation concept determines when goods sent on credit to customers are to be included in the sales figure for the purpose of computing the profit or loss for the accounting period. Which of the following tends to be used in practice to determine when to include a transaction in the sales figure for the period. When the goods have been:
a. dispatched
b. invoiced
c. delivered
d. paid for Give reasons for your answer.
List the distinctive advantages of a computer system over a manual system.
Are debits or credits listed first in journal entries? Are debits or credits indented?
Mr. Sunrise started a business for buying and selling of stationery with ₹ 5,00,000 as an initial investment. Of which he paid ₹ 1,00,000 for furniture, ₹ 2,00,000 for buying stationery items. He employed a sales person and clerk. At the end of the month he paid ₹ 5,000 as their salaries. Out of the stationery bought he sold some stationery for ₹ 1,50,000 for cash and some other stationery for ₹ 1,00,000 on credit basis to Mr. Ravi. Subsequently, he bought stationery items of ₹ 1,50,000 from Mr. Peace. In the first week of next month there was a fire accident and he lost ₹ 30,000 worth of stationery. A part of the machinery, which cost ₹ 40,000, was sold for ₹ 45,000.
From the above, answer the following :
1. What is the amount of capital with which Mr. Sunrise started business?
2. What are the fixed assets he bought?
3. What is the value of the goods purchased?
4. Who is the creditor and state the amount payable to him?
5. What are the expenses?
6. What is the gain he earned?
7. What is the loss he incurred?
8. Who is the debtor? What is the amount receivable from him?
9. What is the total amount of expenses and losses incurred?
10. Determine if the following are assets, liabilities, revenues, expenses or none of the these: sales, debtors, creditors, salary to manager, discount to debtors, drawings by the owner.
Explain how the following may be ascertained from incomplete records:
(a) Opening capital and closing capital
(b) Credit sales and credit purchases
(c) Payments to creditors and collection from debtors
(d) Closing balance of cash.
Choose the correct chronological order of ascertainment of the following profits from the profit and loss account :
(i) Operating Profit, Net Profit, Gross Profit
(ii) Operating Profit, Gross Profit, Net Profit
(iii) Gross Profit, Operating Profit, Net Profit
(iv) Gross Profit, Net Profit, Operating Profit