CIE Accounting Paper-2: Specimen Questions with Answers 95 - 97 of 103

Passage

Mrs. Anthony sold goods worth £10000 to Mrs. Barker on Jan 1st 2016. Mrs. Anthony drew a bill on Mrs. Barker at three months for the full amount. Mrs. Barker accepted the bill and returned to Mrs. Anthony, who discounted the bill with a bank on 5th Feb 2016.@15 %. The bill was duly honored on maturity.

Question number: 95 (2 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

State any two differences between a bill of exchange and a promissory note?

Explanation

The differences between a bills of exchange and promissory note are as follows:

(i) There are 3 parties involved in a bill of exchange namely drawer, drawee and payee while only 2 parties maker and payee are involved in a promissory note.

(ii) The liability of the drawer is secondary in the bill of exchange while the liability of the maker is primary in a promissory note.

Question number: 96 (3 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

What were the other options available to Mrs. Anthony other than discounting the bill with the bank?

Explanation

The other options that were available to Mrs. Anthony were as follows:

(i) Retain the bill till the due date.

(ii) Send the bill to bank for collection

(iii) Discount the bill with some third party

(iv) Endorse the bill to a creditor.

Question number: 97 (4 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

How will Mrs. Anthony journalize the above transactions in her books of accounts?

Explanation

Journal entries in the books of Mrs.

Table of Journal entries in the books of Mrs.

DATE

PARTICULARS

LF

DEBIT AMT

CREDIT AMT

Jan 1st

Mrs. Barker A/c Dr

10000

To Sales

10000

(Being goods sold on credit)

Jan 1st

Bills receivable A/c Dr

10000

To Mrs. Barker A/c

10000

(Being acceptance of bill received)

Feb 5th

Bank A/c Dr

9750

Discount A/c Dr

250

To Bill receivable A/c

10000

(Being bill discounted with bank@15%)