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TS Grewal Class 11 Accountancy Chapter 12 Solutions

TS Grewal Class 11 Accountancy Chapter 12 Solutions

Q: 3. Why are 'noting charges' paid when a bill is dishonoured, and who is ultimately responsible for this cost?

Noting charges are fees paid to a Notary Public, a legal professional, to formally record the fact that a bill has been dishonoured upon presentation. This official certification acts as legal evidence against the drawee. While the holder of the bill (e.g., the drawer or the bank) initially pays these charges, the cost is ultimately recovered from the drawee (acceptor). The drawee is responsible because their failure to honour the payment is the direct cause of the dishonour and the associated legal noting.

Class 11 Accountancy TS Grewal Solutions Chapter 12 - Accounting for Bills of Exchange

The first time a commerce student understands the true nature of Accountancy is in Class 11th. Accountancy is a subject that can be easy for some and tricky for others. It depends on student to student.

The Class 11th is the first step in understanding and learning Accountancy to have a strong base for future concepts. One of the best ways one can understand and conceptualize the important topics of Accountancy is by solving the questions present in the textbook.

Topics in Class 11 TS Grewal Solutions Accounting For Bills of Exchange

According to the Negotiable Instruments Act 1881, a bill of exchange is "a document in writing embodying an unconditional order, signed by the maker, instructing a particular person to pay a certain quantity of money solely to, or to the order of a specific person, or the bearer of the instrument."

Characteristics of a Bill of Exchange

Having a documented bill of exchange is essential. It must include a payment confirmation order, not just a request.
The order should not include any conditions.
The bill of exchange's amount should be set.
The amount owed will be payable on a certain day.
The bill must be signed by both the drawee and the drawer.
The amount mentioned on the bill should be paid on demand or at the end of a certain period of time.
The money is given to the bill's recipient, a specific individual, or in response to a specific request.

Bills of Exchange

Documentary Bill- The bill of exchange is supported by supporting documents that attest to the authenticity of the sale or transaction between the seller and the buyer in this scenario.
Obtain a bill- This bill must be paid as soon as possible. The bill must be cleared whenever it is sent because there is no specified payment deadline.
A use bill is a time-bound bill, indicating that payment must be paid within a certain amount of time.
Inland Bill- An inland bill is only good for one country and cannot be used in another. This measure is the polar opposite of the foreign bill.
The interest rate on a clean bill is higher than on other bills since it does not need the verification of a document.
A bill that may be paid outside of India is referred to as a "foreign bill."
Two examples of foreign bills are an export bill and an import bill.
A law that has been sponsored, developed, and accepted without conditions is known as an accommodation bill.
A trade measure is a law that focuses only on trade.
Supply Bill- A supply bill is a bill that is withdrawn from a government agency by a supplier or contractor.

Because it is a legal instrument, it will be easier for the drawer to lawfully retrieve the money if the drawee fails to pay.

Discounting Facility- If the drawer requires money immediately, the bill can be converted to cash by discounting it from a bank for a little cost.

An endorsement is an option—this bill of exchange can be exchanged from one person to another to pay off a debt.

Parties to the Bill of Exchange

A bill of exchange involves three parties:

Drawer
A bill of exchange is created by the drawer.
The drawer is the one who signs the bill.
A bill of exchange can be drawn by a creditor who is entitled to payment from the debtor.
Winner:
The individual on whom the bill of exchange is drawn is known as the drawee.
The debtor who must pay the money to the drawer is known as the drawee.
'Acceptor' is another name for him.
Recipient:
The payee is the individual who must receive payment.
The drawer or a third party might be the payee.

What is the Meaning of a Promissory Note?

A promissory note is a written instrument (not a banknote or currency note) that contains an unconditional pledge signed by the creator to pay a specified quantity of money solely to or on the direction of a specific person, or to the bearer of the instrument.

The Value of a Promissory Note in a Bill of Exchange

The meaning of a promissory note, according to the Negotiable Instruments Act of 1881, is "an instrument in writing (not a banknote or a currency note) containing an unconditional undertaking signed by the maker to pay a certain sum of money only to or on the order of a specific person, or to the bearer of the instrument." A promissory note payable to the bearer, on the other hand, is prohibited under the Reserve Bank of India Act. As a result, a promissory note can't be paid to the bearer.'

The Signatories to a Promissory Note

A Promissory Note has two parties: the holder and the holder's holder's holder's holder's holder's

Maker:
A maker or drawer is a person or company who creates or draws a promissory note with the commitment to pay a specific amount as indicated in the note. The promisor is another name for Maker.
Payee:
The payee is the individual who is the beneficiary of the promissory note.
The idea of the 'Bill of Exchange' is explained in detail for Commerce students in the above-stated section.

Key Takeaways for Class 11 TS Grewal Solution Accountancy Chapter 12 Solution

Below are the main takeaways from the Class 11 Accounts TS Grewal solutions Chapter 12 Accounting for Bills of Exchange.

First, a bill exchange can only take place when there are three parties involved. The first one is the drawee, which is the party that pays the amount. The payee is the one who receives the money from the drawee. Finally, there is a drawer that is here to oblige the drawee to pay to a payee.
A bill exchange is mainly used to make international trade to help importers and exporters complete their transactions successfully quickly.
Moreover, a bill exchange cannot be termed as a contract in itself. But the parties involved in the exchange can outline the terms of the transaction, such as the credit terms and the rate of accrued interest.

What are the Different Types of Bills Exchange?

In Class 11 TS Grewal solutions Chapter 12 PDF, you learn about different bills exchanged between two parties. A bill that is issued by a bank to a payee is said to be a bank draft. In this exchange, the bank takes the guarantees of the payment done in the transactions.

On the other hand, if individuals take out the bills' exchange, it is said to be a trade draft. Also, a sight draft is a type of bill exchange where the funds need to be paid immediately or on-demand.

Conclusion

With three parties coming together to make a bill exchange possible, in this exchange, sometimes a drawer and the payee can be the same entity when the drawer does not transfer the bill exchange to a third-party payee. Download the PDF of this topic and save it in the drive.

FAQs on TS Grewal Class 11 Accountancy Chapter 12 Solutions

1. How do you find the due date of a bill of exchange in the practical problems for Chapter 12?

To correctly find the due date of a bill of exchange, you must follow the correct method as per the Negotiable Instruments Act, 1881. The steps are:

Start with the date on which the bill is drawn.
Add the specified term (period) of the bill to this date (e.g., 60 days, 3 months).
Finally, add the mandatory 3 Days of Grace.

The resulting date is the final date of maturity. For example, a bill drawn on January 1 for 1 month will mature on February 4. If the maturity date falls on a public holiday, the due date is the preceding business day.

2. What is the correct step-by-step method for recording the journal entries when a bill of exchange is discounted with a bank?

When the drawer of a bill needs funds before the due date, they can discount it with a bank. The correct journal entry to record this in the drawer's books is:

Debit the Bank A/c with the net amount received.
Debit the Discounting Charges A/c with the fee charged by the bank.
Credit the Bills Receivable A/c with the full face value of the bill.

This entry accurately closes the Bills Receivable account and records both the cash inflow and the expense of discounting.

3. Why are 'noting charges' paid when a bill is dishonoured, and who is ultimately responsible for this cost?

Noting charges are fees paid to a Notary Public, a legal professional, to formally record the fact that a bill has been dishonoured upon presentation. This official certification acts as legal evidence against the drawee. While the holder of the bill (e.g., the drawer or the bank) initially pays these charges, the cost is ultimately recovered from the drawee (acceptor). The drawee is responsible because their failure to honour the payment is the direct cause of the dishonour and the associated legal noting.

4. How do the accounting entries differ for a bill sent for collection versus a bill that has been endorsed?

The accounting treatment differs significantly based on the action taken by the drawer:

Bill Sent for Collection: The drawer does not part with the ownership of the bill. They simply hand it to their bank for safekeeping and presentation on the due date. A memorandum account called 'Bill Sent for Collection A/c' is debited to track the bill. The main entry is passed only when the amount is collected.
Bill Endorsed: The drawer transfers the ownership of the bill to one of their creditors to settle a debt. The entry involves debiting the Creditor's A/c and crediting the Bills Receivable A/c, completely transferring the asset to the new holder (endorsee).

5. What is the core difference in accounting treatment between a 'Trade Bill' and an 'Accommodation Bill'?

The main difference in solving problems lies in their underlying purpose, which dictates the accounting entries:

A Trade Bill is drawn against a genuine commercial transaction, such as the sale of goods. The accounting entries reflect a standard debtor-creditor relationship.
An Accommodation Bill is drawn without any trade consideration, purely to provide financial assistance to one or more parties. The proceeds from discounting are typically shared. The accounting must track the shared funds, the liability of each party to the other, and the ultimate repayment, making the entries more complex than for a trade bill.

6. What steps should be followed to record the renewal of a bill in the books of the drawer?

To correctly solve problems on renewal of a bill as per the CBSE 2025-26 syllabus, follow these four steps in the drawer's books:

Cancel the old bill: Reverse the original entry by debiting the Drawee's A/c and crediting the Bills Receivable A/c for the full amount of the old bill.
Record interest charges: Debit the Drawee's A/c and credit the Interest A/c for the interest charged for the extended credit period.
Record part payment (if any): Debit Cash/Bank A/c and credit the Drawee's A/c for any partial payment received.
Record the new bill: Debit a new Bills Receivable A/c and credit the Drawee's A/c for the amount of the new bill (which is the remaining balance plus interest).

7. In what situation would a drawer and payee be the same person, and how does this simplify the journal entries?

The drawer and the payee are the same person in the simplest and most common scenario: when the drawer holds the bill until maturity and presents it for payment themselves. This situation simplifies the journal entries because there is no need to record an endorsement (transferring the bill to a third-party creditor). The transaction remains a direct settlement between the original drawer and drawee, avoiding the complexity of tracking the bill's transfer to another party.

8. Why is a promissory note considered an 'undertaking to pay' while a bill of exchange is an 'order to pay', and how does this affect the parties involved?

This distinction is fundamental and affects who initiates the instrument and the number of parties involved:

A Promissory Note is a direct promise from the debtor (called the Maker) to pay the creditor (called the Payee). It is a two-party instrument initiated by the person who owes money.
A Bill of Exchange is an order from the creditor (Drawer) instructing the debtor (Drawee) to pay. It becomes a valid instrument only after the drawee 'accepts' the order. This makes it a three-party instrument (drawer, drawee, and payee), initiated by the person to whom money is owed.