1. What is "Noting" in the context of a Bill of Exchange?
Signing the bill by the drawee.
Recording the bill in the ledger.
Discounting the bill with a bank.
Recording the fact of dishonour by a Notary Public.
Explanation:
When a bill is dishonoured, the holder gets it "Noted" by a Notary Public to establish legal proof of presentation and dishonour. This is the first step before "Protesting".
2. How many "Days of Grace" are added to the tenure of a Bill of Exchange to calculate the due date?
Explanation:
As per the Negotiable Instruments Act, 3 days of grace are allowed for bills payable "after date" or "after sight". They are not allowed for "On Demand" bills.
3. An "Accommodation Bill" is drawn:
To provide financial help to one or both parties without any actual trade transaction.
To facilitate money laundering.
By the bank on the customer.
For genuine trade transactions.
Explanation:
Accommodation bills are not backed by the sale of goods. They are drawn for mutual financial accommodation (to discount and raise money).
4. Transferring the ownership of a Bill of Exchange to another person by signing on the back is called:
Discounting
Noting
Endorsement
Retiring
Explanation:
Endorsement is the act of signing the instrument (usually on the back) for the purpose of negotiation (transferring title).
5. The person who is directed to pay the amount of the Bill of Exchange is known as:
Endorser
Drawer
Payee
Drawee
Explanation:
The Drawer makes the bill; the Drawee (debtor) is the one directed to pay; the Payee receives the money.
6. The fee paid to the Notary Public for noting the dishonour of a bill is called:
Legal Fee
Noting Charge
Commission
Penalty
Explanation:
Noting Charges are paid by the holder initially but are ultimately recoverable from the drawee (who dishonoured the bill).
7. When a drawee pays the bill before its due date and receives a "Rebate", how is this Rebate treated in the drawee's books?
Credited to Bank Account.
Credited to Rebate Account (Gain).
Debited to Interest Account (Expense).
Debited to Discount Account.
Explanation:
Retiring a bill under rebate means paying early. The rebate received is a Gain for the drawee (payer), so it is Credited. (For the holder/receiver, it is an Expense/Debit).
8. If the Drawee (Acceptor) of a bill becomes insolvent, the bill is considered:
Honoured
Renewed
Retiring
Dishonoured
Explanation:
Insolvency implies inability to pay. When the drawee is declared insolvent, the bill is automatically treated as dishonoured, and the holder can claim the amount (dividend) from the drawee's estate.
9. Who ultimately bears the "Noting Charges"?
The Notary
The Holder
The Drawee (Acceptor)
The Bank
Explanation:
The holder pays the notary initially, but since the dishonour was the drawee's fault, the expense is recoverable from the Drawee.
10. Foreign Bills are often drawn in "Sets" (usually 3 parts). Why?
It is a custom with no reason.
To increase the value.
To avoid delay or loss in transit.
To pay three different people.
Explanation:
Parts are sent via different routes/mails. As soon as one part is accepted/paid, the others become void. This ensures safety in international trade.
11. An endorsement where the endorser just signs his name without specifying the endorsee is called:
Endorsement in Blank
Restrictive Endorsement
Full Endorsement
Sans Recourse Endorsement
Explanation:
Blank endorsement converts the bill into a bearer instrument, transferable by delivery alone.
12. In an Accommodation Bill, if X draws a bill on Y, and they share proceeds, who bears the discount charge?
X and Y in the ratio of proceeds shared
The Bank
Only Y
Only X
Explanation:
Since both benefit from the funds, the cost of funds (discount) is shared in the same proportion as the proceeds.