CBSE Class 11 Accountancy Chapter 8 Bills of Exchange Worksheet with Answers

A Bill of Exchange is a written, unconditional order by the drawer directing the drawee to pay a specified sum on demand or at a future date to the payee or bearer. Chapter 8 in NCERT Class 11 Accountancy introduces three parties: drawer (creditor who draws the bill), drawee (debtor who accepts and pays), and payee (person who receives payment, often the drawer himself). The chapter explains acceptance (drawee signing the bill), discounting (selling the bill to a bank before maturity), endorsement (transferring rights to another party), dishonour (non-payment at maturity), noting charges (banker's fees for dishonour certificate), and renewal (extending the bill's tenure). Accounting treatment varies by transaction type: acceptance creates a 'Bills Receivable' account for the drawer and 'Bills Payable' account for the drawee; discounting debits Bank and Credits Bills Receivable; dishonour reverses the original entries and adds noting charges. Mastering journal entries for each scenario is essential for CBSE exams, where 5–8 marks typically come from this chapter in the Theory paper.

This worksheet is calibrated to CBSE moderate-to-challenging difficulty, suitable for mid-term and annual exam preparation. Allocate 90–120 minutes in a single sitting to simulate exam conditions. The question distribution mirrors CBSE blueprint: Section A (8 MCQs × 1 mark = 8 marks), Section B (6 fill-in-the-blanks × 1 mark = 6 marks), Section C (10 true/false × 1 mark = 10 marks), Section D (6 short-answer questions × 3-4 marks = 20 marks), Section E (3 long-answer questions × 6 marks + 1 case study × 8 marks = 26 marks), totalling 70 marks. Students scoring 50+ demonstrate strong conceptual grip and journal-entry fluency. Those scoring 35–49 should revisit NCERT examples on discounting and dishonour. Below 35 indicates gaps in basic entries and definitions, requiring focused revision of Chapter 8 notes. Use the answer key not just to tally marks but to understand the logic behind each debit-credit pair, especially for complex transactions like renewal with interest or cascade endorsements.

1. A Bill of Exchange is a __________ instrument. (a) negotiable (b) non-negotiable (c) capital (d) revenue. 2. The party who draws the bill is called: (a) drawee (b) drawer (c) payee (d) endorser. 3. Acceptance of a bill is done by the: (a) drawer (b) payee (c) drawee (d) bank. 4. When a bill is discounted, the account debited is: (a) Bills Receivable (b) Bank (c) Discount (d) Both (b) and (c). 5. Noting charges on dishonour of a bill are borne by the: (a) drawer (b) drawee (c) payee (d) bank. 6. Endorsement in blank means: (a) no signature (b) payee's name not specified (c) bill cancelled (d) bill renewed. 7. If the drawee fails to pay on maturity, the bill is said to be: (a) honoured (b) discounted (c) dishonoured (d) endorsed. 8. Renewal of a bill usually involves: (a) cancelling the old bill and drawing a new one (b) paying interest on the extended period (c) both (a) and (b) (d) none of these. These MCQs test factual recall, definitions, and the ability to identify correct accounting treatments. Students must read each option carefully, as distractors mirror common errors seen in CBSE answer scripts.

1. A bill before acceptance is called a __________. 2. The process of transferring a bill to another party is known as __________. 3. When a bill is sent to the bank before the due date for immediate cash, it is called __________. 4. The fees charged by a bank for certifying dishonour of a bill are called __________. 5. The party liable to pay the bill is the __________. 6. If a bill is renewed, the drawer often charges __________ for the extended period. This section reinforces NCERT terminology. Answers must be precise: 'draft', 'endorsement', 'discounting', 'noting charges', 'drawee', and 'interest'. Students lose marks for synonyms like 'commission' instead of 'noting charges' or 'debtor' instead of 'drawee'. Practising fill-in-the-blanks sharpens recall of exact terms used in CBSE mark schemes, which award zero for vague or incorrect terminology even if the concept is understood. Use NCERT Class 11 Accountancy glossary to verify each term before the exam.

1. The drawer and payee of a bill are always different persons. (False – often the same) 2. Acceptance makes the drawee legally liable to pay. (True) 3. Discounting a bill involves selling it to a bank at face value. (False – sold at a discount) 4. Noting charges are debited to the drawee's account. (True) 5. Endorsement in full specifies the name of the new payee. (True) 6. A dishonoured bill increases the drawer's Bills Receivable balance. (False – it is reversed) 7. Renewal of a bill cancels the old bill and creates a new one. (True) 8. The drawer credits Bills Receivable when the bill is accepted. (True) 9. If a bill is met on due date, it is said to be dishonoured. (False – it is honoured) 10. Interest on renewal is always capitalized into the new bill amount. (True – typically). True/False questions test nuanced understanding. Students must consider exceptions: for example, statement 1 is false because the drawer often retains the payee role. Statement 3 trips many who forget that discounting involves a discount charge, not full face value. CBSE awards 1 mark per correct answer with no negative marking, so educated guesses are better than leaving blanks.

1. Pass journal entries in the books of the drawer when a bill for ₹5,000 is accepted by the drawee. 2. On 1st April, A discounts a 3-month bill of ₹12,000 at 12% per annum. Pass the journal entry in A's books. 3. B's acceptance for ₹8,000 is dishonoured on due date. Noting charges ₹200. Pass entries in both B's and the drawer's books. 4. Explain the concept of endorsement and pass the entry when C endorses a bill of ₹10,000 to D in settlement of a debt. 5. What is meant by renewal of a bill? If a ₹15,000 bill is renewed for 2 months at 10% p.a., show the journal entries. 6. Distinguish between Bills Receivable and Bills Payable accounts with one example each. Each question carries 3–4 marks. Full marks require: correct account titles, proper debit-credit order, narration (optional but recommended), and amounts. Common mistakes include swapping Bills Receivable and Bills Payable, omitting Discount or Noting Charges accounts, and incorrect interest calculations. Show all workings for interest: (Principal × Rate × Time)/100. CBSE examiners deduct 0.5–1 mark for missing narrations or untidy presentation.

Long Answer 1 (6 marks): X draws a bill on Y for ₹20,000 payable after 3 months. Y accepts and returns it. After 1 month, X discounts it with his bank at 15% p.a. On due date, Y dishonours; noting charges ₹500. Pass all journal entries in the books of X and Y. Long Answer 2 (6 marks): P sold goods worth ₹30,000 to Q. P draws a 2-month bill which Q accepts. Before maturity, P endorses the bill to R in full settlement of ₹30,000 debt. On due date, the bill is honoured. Pass entries in the books of P, Q, and R. Long Answer 3 (6 marks): Define Bills of Exchange. Explain acceptance, discounting, and dishonour with one journal entry example for each. Case Study (8 marks): M Ltd. sold machinery worth ₹50,000 to N Ltd. on 1st Jan 2024. M drew a 4-month bill on N, who accepted it. On 1st March, M discounted the bill at 18% p.a. On maturity (1st May), N requested renewal for 2 months at 12% p.a. interest, paying ₹10,000 in cash immediately. The renewed bill was met on due date. Required: (i) Calculate discount on first bill. (ii) Calculate interest on renewal. (iii) Pass journal entries in M's books for all transactions from acceptance to final payment. (iv) Pass journal entries in N's books for renewal and payment. These questions demand multi-step reasoning, ledger knowledge, and accurate arithmetic. Each sub-question in the case study carries 2 marks. Show every calculation step. CBSE mark schemes award method marks even if the final answer is wrong, so never skip workings.

Section A Answers: 1.(a) negotiable 2.(b) drawer 3.(c) drawee 4.(d) Both Bank and Discount 5.(b) drawee 6.(b) payee's name not specified 7.(c) dishonoured 8.(c) both cancelling old bill and paying interest. Section B Answers: 1. draft 2. endorsement 3. discounting 4. noting charges 5. drawee 6. interest. Section C Answers: 1.False 2.True 3.False 4.True 5.True 6.False 7.True 8.True 9.False 10.True. Section D Sample Solution (Q1): In Drawer's books: Bills Receivable A/c Dr. 5,000; To Drawee A/c 5,000. In Drawee's books: Drawer A/c Dr. 5,000; To Bills Payable A/c 5,000. (Q2): Discount = 12,000×12%×3/12 = ₹360. Entry: Bank A/c Dr. 11,640, Discount A/c Dr. 360; To Bills Receivable A/c 12,000. (Q3 Drawer's books): Drawee (B) A/c Dr. 8,200; To Bills Receivable A/c 8,000, To Bank A/c 200 (noting charges). In B's books: Bills Payable A/c Dr. 8,000, Noting Charges A/c Dr. 200; To Drawer A/c 8,200. Section E Long Answer 1: (i) Discount on ₹20,000 for 2 months at 15% = 20,000×15%×2/12 = ₹500. X's entries: 1.Acceptance: B/R Dr.20,000; To Y 20,000. 2.Discounting: Bank Dr.19,500, Discount Dr.500; To B/R 20,000. 3.Dishonour: Y Dr.20,500; To B/R(new) 20,000, Bank 500. Y's entries: 1.Acceptance: X Dr.20,000; To B/P 20,000. 2.Dishonour: B/P Dr.20,000, Noting Dr.500; To X 20,500. Case Study: (i)1,500 (ii)800 (iii)M: Acceptance: B/R Dr.50,000; To N 50,000. Discounting: Bank Dr.48,500, Discount Dr.1,500; To B/R 50,000. Renewal: N Dr.50,000; To B/R(old)50,000 | Bank Dr.10,000, B/R(new)Dr.40,800; To N 50,000, Interest 800. Payment: Bank Dr.40,800; To B/R 40,800. (iv)N: Old: M Dr.50,000; To B/P 50,000. Renewal: B/P Dr.50,000, Interest Dr.800; To M 50,000, Bank 10,000, B/P(new)40,800. Payment: B/P Dr.40,800; To Bank 40,800. Every answer includes narrations and step-by-step workings to help students self-assess and learn the correct format. Cross-check each entry against NCERT solved examples in Chapter 8 for consistency.

First, attempt the worksheet in one sitting under timed conditions—90 minutes minimum, 120 minutes maximum—to simulate exam pressure. Keep your NCERT textbook and notes closed during the attempt. After completing, spend another 30–45 minutes reviewing the answer key section by section, marking your answers in a different colour pen. For each mistake, write a one-line reason: 'forgot to debit Discount', 'swapped drawer and drawee', 'wrong interest formula'. Create a personal error log listing weak areas like 'dishonour entries' or 'renewal calculations'. Reattempt only the incorrect questions after revising the relevant NCERT examples. Track your score over multiple attempts; aim to improve by at least 10 marks each week. Use this worksheet as a diagnostic tool rather than a one-time test: errors reveal gaps in conceptual understanding or journal-entry mechanics. For students preparing for CBSE quarterly or half-yearly exams, complete this worksheet two weeks before the exam, then solve CBSE sample papers to apply the same concepts in mixed-chapter scenarios. Parents can use the worksheet to gauge whether their child needs extra coaching on Bills of Exchange—a score below 40/70 suggests booking focused doubt-clearing sessions.

Mistake 1: Confusing Bills Receivable (asset for drawer) with Bills Payable (liability for drawee). Remedy: Always ask 'Am I holding the bill or liable to pay it?' before choosing the account. Mistake 2: Forgetting to debit Discount A/c when discounting. Remedy: Remember discounting has a cost; the formula is Bank (net) Dr., Discount (cost) Dr.; To B/R (face). Mistake 3: Omitting Noting Charges on dishonour. Remedy: Dishonour always involves noting charges paid by the holder; debit the drawee and credit Bank. Mistake 4: Incorrect interest calculation on renewal. Remedy: Use (Principal × Rate × Time in months)/1200 for monthly interest. Mistake 5: Swapping debit and credit in endorsement entries. Remedy: Endorsement transfers the bill, so credit B/R and debit the party to whom you owe money. Mistake 6: Illegible handwriting or missing narrations in journal entries. Remedy: Write account names in full, underline Dr./Cr., and add a brief narration in brackets. Mistake 7: Not cancelling the old bill on renewal. Remedy: Renewal requires two steps—cancel old B/P, then accept new B/P for (old amount + interest - cash). These seven mistakes account for 60-70 percent of marks lost in CBSE Class 11 Accountancy Chapter 8 questions, based on CBSE marking reports. Drilling these remedies into practice dramatically improves accuracy.

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