Accountancy MCQs
Topic Notes: Accountancy
General Description
Plato
- Biography: Ancient Greek philosopher (427–347 BCE), student of Socrates and teacher of Aristotle, founder of the Academy in Athens.
- Important Ideas:
- Theory of Forms
- Philosopher-King
- Ideal State
1
Who is legally responsible for paying the notary public's charges when an endorsed bill is dishonoured?
Answer:
The individual accountable for the dishonour
When a bill is dishonoured, the holder must have it noted by a notary public to obtain legal proof of dishonour. The notary charges a fee for this service. Ultimately, these noting charges are recoverable from the party whose default or failure to pay caused the dishonour of the bill.
2
What is the fee charged by a notary public to the holder in the event of a bill being dishonored?
Answer:
Noting charges
When a bill is dishonored, the holder may approach a notary public to formally record the fact of dishonor. The fee charged by the notary for this legal service is known as 'noting charges'. These charges are initially paid by the holder but are ultimately recoverable from the party liable for the dishonor.
3
At what stage of a bill of exchange's lifecycle are noting charges typically incurred?
Answer:
Dishonor of the bill
Noting charges are fees paid to a Notary Public to formally certify that a bill of exchange has been dishonored upon presentation. This legal certification serves as official evidence of the dishonor, which is necessary if the holder needs to pursue legal action against the drawer or endorser. These charges are initially paid by the holder but are ultimately recoverable from the party responsible for the dishonor.
4
When a bill of exchange is dishonored and noting charges are incurred, which account does the drawee debit?
Answer:
Noting charges account
When a bill is dishonored, the drawee must record the liability for the noting charges. Since these charges are an expense incurred due to the failure to honor the payment, the drawee debits the Noting Charges account and credits the Drawer's account to reflect the increased amount owed.
5
Under what circumstances does the drawer debit the acceptor's account for noting charges paid?
Answer:
Dishonor of a bill
When a bill of exchange is dishonored, the holder incurs noting charges to legally certify the dishonor. The drawer pays these charges but is entitled to recover them from the acceptor. Therefore, the drawer debits the acceptor's account to increase the amount the acceptor owes.
6
Under what circumstances does the drawer debit the acceptor's account for noting charges?
Answer:
Dishonour of a bill
When a bill is dishonoured, the holder incurs noting charges to legally certify the dishonour. The drawer pays these charges but recovers them from the acceptor (the debtor) by debiting the acceptor's account, as the acceptor is ultimately responsible for the costs associated with the default.
7
What is the term for the fee charged by a notary public when a bill of exchange is dishonoured?
Answer:
Noting charges
When a bill of exchange is dishonoured, the holder may approach a notary public to formally record the fact of dishonour. The fee charged by the notary public for this service is known as noting charges. These charges are initially paid by the holder but are ultimately recoverable from the party responsible for the dishonour of the bill.
8
When a bill is dishonored and noting charges are paid, which account does the drawee debit?
Answer:
Noting charges account
When a bill of exchange is dishonored, the drawee is responsible for the noting charges incurred. The drawee debits the Noting Charges account because these charges represent an additional expense resulting from the failure to meet the payment obligation. This entry ensures that the total liability owed to the drawer is correctly adjusted to include the costs associated with the legal protest of the dishonored instrument.
9
Who is ultimately responsible for bearing the cost of noting charges incurred on a dishonored bill of exchange?
Answer:
Drawee
Noting charges are fees paid to a notary public to legally certify the dishonor of a bill. Although the drawer or holder may pay these charges initially to the notary, the legal liability for this expense rests with the drawee, as their failure to honor the payment obligation caused the necessity for the protest.
10
When a bill of exchange is dishonored, which official is responsible for formally noting the dishonor?
Answer:
Notary public
When a bill is dishonored, the holder may approach a Notary Public to have the fact of dishonor officially recorded. This process is known as 'noting,' and the Notary Public provides a certificate of protest, which serves as legal evidence of the dishonor in case of future litigation.