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
For which party is the interest charged on the renewal of a bill considered revenue?
Answer:
Drawer
When a bill is renewed, the drawer grants an extension of time to the drawee. The interest charged for this delay is compensation for the extended credit period, making it an income or revenue for the drawer. Conversely, for the drawee, this interest represents an expense for the privilege of delaying payment.
2
In the books of the drawer, which account is credited when a bill of exchange is renewed?
Answer:
Drawer
When a bill is renewed, the drawer charges interest to the drawee. Since interest is an income for the drawer, the Interest Account is credited in the drawer's books. The drawee's account is debited for the total amount due, including the interest.
3
When a bill of exchange is renewed, the interest charged for the extension period is considered an expense for which party?
Answer:
Drawee
When a bill is renewed, the drawee (the person who owes the money) requests an extension of time. The drawer charges interest for this delay, making it an additional cost or expense for the drawee, who must pay the interest along with the principal amount at the new maturity date.
4
When a bill is renewed, which party records the interest as a credit in their books?
Answer:
Drawer
When a bill is renewed, the drawer charges interest to the drawee for the extended period of credit. For the drawer, this interest is an income, and therefore, the interest account is credited in the drawer's books. The drawee, conversely, treats this as an expense and debits the interest account.