IGCSE Accounting Paper-2: Specimen Questions with Answers 95 - 97 of 189

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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 95 (2 of 5 Based on Passage)

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Short Answer▾

What is meant by discounting the bill?

Explanation

When the holder of a bill sells the bill to a bank or any other third party, before the maturity of the bill, it is called as discounting the bill. This is done b the holder when he needs the money on immediate basis. The bank or the third party usually charges a discount for the unexpired period of the bill.

Question 96 (3 of 5 Based on Passage)

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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 97 (4 of 5 Based on Passage)

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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.

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