Question 1

What is "Noting" in the context of a Bill of Exchange?

Discounting the bill with a bank.Recording the fact of dishonour by a Notary Public.Recording the bill in the ledger.Signing the bill by the drawee.

View 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".

Question 2

How many "Days of Grace" are added to the tenure of a Bill of Exchange to calculate the due date?

3 Days2 Days1 Day5 Days

View 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.

Question 3

An "Accommodation Bill" is drawn:

To provide financial help to one or both parties without any actual trade transaction.By the bank on the customer.To facilitate money laundering.For genuine trade transactions.

View Explanation

Accommodation bills are not backed by the sale of goods. They are drawn for mutual financial accommodation (to discount and raise money).

Question 4

Transferring the ownership of a Bill of Exchange to another person by signing on the back is called:

NotingRetiringDiscountingEndorsement

View Explanation

Endorsement is the act of signing the instrument (usually on the back) for the purpose of negotiation (transferring title).

Question 5

The person who is directed to pay the amount of the Bill of Exchange is known as:

DrawerEndorserDraweePayee

View Explanation

The Drawer makes the bill; the Drawee (debtor) is the one directed to pay; the Payee receives the money.

Question 6

The fee paid to the Notary Public for noting the dishonour of a bill is called:

PenaltyNoting ChargeLegal FeeCommission

View Explanation

Noting Charges are paid by the holder initially but are ultimately recoverable from the drawee (who dishonoured the bill).

Question 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 Rebate Account (Gain).Credited to Bank Account.Debited to Discount Account.Debited to Interest Account (Expense).

View 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).

Question 8

If the Drawee (Acceptor) of a bill becomes insolvent, the bill is considered:

HonouredRenewedRetiringDishonoured

View 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.

Question 9

Who ultimately bears the "Noting Charges"?

The HolderThe NotaryThe BankThe Drawee (Acceptor)

View Explanation

The holder pays the notary initially, but since the dishonour was the drawee's fault, the expense is recoverable from the Drawee.

Question 10

Foreign Bills are often drawn in "Sets" (usually 3 parts). Why?

To avoid delay or loss in transit.It is a custom with no reason.To pay three different people.To increase the value.

View 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.

Question 11

An endorsement where the endorser just signs his name without specifying the endorsee is called:

Endorsement in BlankSans Recourse EndorsementRestrictive EndorsementFull Endorsement

View Explanation

Blank endorsement converts the bill into a bearer instrument, transferable by delivery alone.

Question 12

In an Accommodation Bill, if X draws a bill on Y, and they share proceeds, who bears the discount charge?

Only XThe BankX and Y in the ratio of proceeds sharedOnly Y

View Explanation

Since both benefit from the funds, the cost of funds (discount) is shared in the same proportion as the proceeds.

JAIIB Quiz

Quiz Finished!