CPT Chapter Bills of Exchange & Promissory Note

CA CPT syllabus “Bills of Exchange & Promissory Note” deals with the features, benefits and differences of a Bill of Exchange , a Promissory Note and a Foreign Bill.  It explains the accounting treatment when bills are honoured or dishonoured in case of a Bill Receivable, a Bill Payable or an Accommodation Bill. Terms like discounting of a bill, retirement of a bill, rebate on a bill etc are also discussed.

CA CPT Exam  

With Sheela Warrier.Duration:4hrs 42min

Bills of Exchange & Promissory Note Duration (min:sec)
What is Bills of Exchange & Promissory Note?  
{modal https://www.youtube.com/embed/k7Exf-WfDos?autoplay=1;rel=0|width=780|height=439|title=Introduction}Introduction{/modal} 03:13
{modal https://www.youtube.com/embed/YJVutj693Ec?autoplay=1;rel=0|width=780|height=439|title=What is BOE}What is BOE{/modal} 12:00
{modal https://www.youtube.com/embed/pu-Bu9GthCQ?autoplay=1;rel=0|width=780|height=439|title=When do we need BOE}When do we need BOE{/modal} 04:25
{modal https://www.youtube.com/embed/08l0D6QSpd8?autoplay=1;rel=0|width=780|height=439|title=Parties to BOE}Parties to BOE{/modal} 09:31
{modal https://www.youtube.com/embed/tISq8l7xLjI?autoplay=1;rel=0|width=780|height=439|title=Promissory Note}Promissory Note{/modal} 07:57
{modal https://www.youtube.com/embed/5AhLk52s9Hk?autoplay=1;rel=0|width=780|height=439|title=Diff Between BOE & Promissory Note}Diff Between BOE & Promissory Note{/modal} 03:42
{modal https://www.youtube.com/embed/YG4VEPBcyk4?autoplay=1;rel=0|width=780|height=439|title=End of Currency Note & Foreign Bill}End of Currency Note & Foreign Bill{/modal} 01:55
{modal https://www.youtube.com/embed/ZMhGpsR3mF0?autoplay=1;rel=0|width=780|height=439|title=Summary}Summary{/modal} 04:16
{modal https://www.youtube.com/embed/hHTfyjthU8o?autoplay=1;rel=0|width=780|height=439|title=Quiz}Quiz{/modal} 06:14
Accounting Treatment  
{modal https://www.youtube.com/embed/CRQclxnWK7I?autoplay=1;rel=0|width=780|height=439|title=Bills Receivable Payable}Bills Receivable Payable{/modal} 05:05
{modal https://www.youtube.com/embed/8t_O9J8x_G0?autoplay=1;rel=0|width=780|height=439|title=Accounting Entry}Accounting Entry{/modal} 18:58
{modal https://www.youtube.com/embed/td68A-Kma_8?autoplay=1;rel=0|width=780|height=439|title=Dishonour of Bill}Dishonour of Bill{/modal} 24:24
{modal https://www.youtube.com/embed/5PxDJuKr-C4?autoplay=1;rel=0|width=780|height=439|title=New Bill at Maturity}New Bill at Maturity{/modal} 04:27
{modal https://www.youtube.com/embed/qttkg4FX-s4?autoplay=1;rel=0|width=780|height=439|title=Entry in the Books of Debtor}Entry in the Books of Debtor{/modal} 08:08
{modal https://www.youtube.com/embed/Stu2od_pNYc?autoplay=1;rel=0|width=780|height=439|title=Dishonour & Insolvency}Dishonour & Insolvency{/modal} 13:28
{modal https://www.youtube.com/embed/T76wz1mKNkM?autoplay=1;rel=0|width=780|height=439|title=Accounting Entry Summary}Accounting Entry Summary{/modal} 13:25
{modal https://www.youtube.com/embed/3U-0WhSevqQ?autoplay=1;rel=0|width=780|height=439|title=Quiz}Quiz{/modal} 17:38
Period of Bill  
{modal https://www.youtube.com/embed/OINJn6hEIM0?autoplay=1;rel=0|width=780|height=439|title=Maturity date of bill}Maturity date of bill{/modal} 06:31
{modal https://www.youtube.com/embed/9c3KKe4Za7U?autoplay=1;rel=0|width=780|height=439|title=How many days in a month}How many days in a month{/modal} 03:19
{modal https://www.youtube.com/embed/u8Mm--b0V24?autoplay=1;rel=0|width=780|height=439|title=Example- Date of Maturity}Example- Date of Maturity{/modal} 04:51
{modal https://www.youtube.com/embed/2EfddheLmIM?autoplay=1;rel=0|width=780|height=439|title=Public holidays}Public holidays{/modal} 02:08
{modal https://www.youtube.com/embed/Iyc07k43WA4?autoplay=1;rel=0|width=780|height=439|title=Renewal of a Bill}Renewal of a Bill{/modal} 07:18
{modal https://www.youtube.com/embed/I-5xMkm_qxo?autoplay=1;rel=0|width=780|height=439|title=Retirement of Bill}Retirement of Bill{/modal} 07:08
{modal https://www.youtube.com/embed/KPB3fn8vlYM?autoplay=1;rel=0|width=780|height=439|title=Quiz}Quiz{/modal} 14:21
{modal https://www.youtube.com/embed/gyFIycwegvE?autoplay=1;rel=0|width=780|height=439|title=Accommodation of Bill}Accommodation of Bill{/modal} 07:09
{modal https://www.youtube.com/embed/KuVzxwYhrzM?autoplay=1;rel=0|width=780|height=439|title=Accommodation Problem}Accommodation Problem{/modal} 11:58
{modal https://www.youtube.com/embed/RzAYUIh8PkM?autoplay=1;rel=0|width=780|height=439|title=Bills for Collection}Bills for Collection{/modal} 01:22
{modal https://www.youtube.com/embed/cK_CsHVccXo?autoplay=1;rel=0|width=780|height=439|title=Bills Receivable & Payable Book}Bills Receivable & Payable Book{/modal} 06:03
{modal https://www.youtube.com/embed/JwSx7kO-VHg?autoplay=1;rel=0|width=780|height=439|title=Quiz}Quiz{/modal} 10:29
{modal https://www.youtube.com/embed/rHRlcrns7Jk?autoplay=1;rel=0|width=780|height=439|title=Final Quiz}Final Quiz{/modal} 17:18
{modal https://www.youtube.com/embed/SsJHFsp-uBs?autoplay=1;rel=0|width=780|height=439|title=Additional Questions}Additional Questions{/modal} 5:07
{modal https://www.youtube.com/embed/BgdsDDu-kf0?autoplay=1;rel=0|width=780|height=439|title=Conclusion}Conclusion{/modal} 18:25
Total 4:37:06

Notes

Few things covered by us:

Bills of Exchange

What is a Bill of Exchange?
What is a Promissory Note?
Discounting, endorsement and dishonour of bills
Accounting entries
When does a Bill Mature
Renewal of a Bill
Retirement of a Bill
Accommodation Bills
Bills for Collection
Day Books
Conclusion

What is a Bill of Exchange


In writing & not oral.
must be dated.
unconditional order
must sign it.
stamped as per law
amount certain.
payable to certain person.
payable either on demand or on the expiry of a fixed period of time.
must be accepted

When do we need Bill of Exchange

Credit transactions
Evidence of debt
Discount and raise cash
Negotiable instrument
Negotiable Instrument Act 1881

Parties to a Bill of Exchange

Drawer / Maker / Creditor / Seller
Drawee / Acceptor / Debtor / Payer / Buyer
Payee
Endorsee

Parties to a Promissory Note

Drawer / Payer/ Promisor / Maker
Drawee / Payee / Promisee
Endorsee

What is a Promissory Note

in writing and not oral
unconditional promise to pay
signed by the maker
maker certain person
sum payable certain
the person to whom payment -must be certain. Not payable to a bearer
sum payable certain
properly stamped
(does not require acceptance because the maker himself promises to make the payment)

Foreign Bill

Bill drawn in one country but payable in another.

Examples:
A bill drawn in India but payable to a resident outside India & made payable outside India
A bill drawn outside India on a person resident outside India
A bill drawn outside India made payable in India
A bill drawn outside India made payable outside India

Accounting Treatment

Bills Receivable (Asset)
who receives an accepted Bill of Exchange
who receives a Promissory Note

Bills Payable (Liability)
who accepts a Bill of Exchange
who makes a Promissory Note

Personal account - representing debtor and creditor

Insolvency and Dishonour

What is insolvency ?

Entries for dishonour
Recovery from estate
Bad debt - creditor
Deficiency - debtor

Date of Maturity

Bill After Date
Bill After Sight
Days of Grace
Bill at Sight / Demand

Renewal of Bill

Cancel old bill
Create new bill
Interest for period of new bill
Journal entries

Retirement of a Bill

Early Payment
Rebate on Bills Retired
Journal Entries


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