1. What is "Noting" in the context of a Bill of Exchange?
Recording the fact of dishonour by a Notary Public.
Discounting the bill with a bank.
Signing the bill by the drawee.
Recording the bill in the ledger.
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.
For genuine trade transactions.
By the bank on the customer.
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:
Endorsement
Retiring
Noting
Discounting
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:
Drawer
Endorser
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:
Commission
Penalty
Noting Charge
Legal Fee
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?
Debited to Discount Account.
Credited to Rebate Account (Gain).
Credited to Bank Account.
Debited to Interest Account (Expense).
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:
Renewed
Dishonoured
Retiring
Honoured
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 Holder
The Drawee (Acceptor)
The Bank
The Notary
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?
To increase the value.
To pay three different people.
To avoid delay or loss in transit.
It is a custom with no reason.
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:
Full Endorsement
Restrictive Endorsement
Sans Recourse Endorsement
Endorsement in Blank
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?
The Bank
X and Y in the ratio of proceeds shared
Only X
Only Y
Explanation:
Since both benefit from the funds, the cost of funds (discount) is shared in the same proportion as the proceeds.