CBSE Class 11 Financial Accounting: Bills of Exchange NCERT Solutions

Reviewed by NCERT Help Editorial Team · Updated on 29 Jul 2026

NCERT Solutions PDF Class 11 PDF

This chapter provides a detailed exploration of Bills of Exchange, a crucial concept in financial accounting for Class 11 students following the CBSE curriculum. The NCERT Solutions cover the fundamental aspects of negotiable instruments, including cheques, bills of exchange, and promissory notes. Students will learn about the essential features of a bill of exchange, the parties involved (drawer, drawee, payee), and the process of determining the maturity date, including the concept of 'days of grace'. The solutions also explain what constitutes the dishonour of a bill and the accounting entries required. Understanding these concepts is vital for students to grasp commercial transactions and maintain accurate financial records. These solutions are designed to aid students in comprehending the chapter's content thoroughly, clarifying doubts, and preparing effectively for their examinations by offering step-by-step explanations and clear definitions.

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Board	CBSE
Class	Class 11
Subject	Financial Accounting
Session	2026
Language	English
Type	NCERT Solutions
Chapter	Chapter 8

Chapter summary

Chapter 8, Bills of Exchange, for CBSE Class 11 Financial Accounting, focuses on negotiable instruments. The NCERT Solutions explain the characteristics and parties involved in bills of exchange and promissory notes. Key topics include the essential features of a bill of exchange, the calculation of maturity dates with days of grace, and the accounting treatment for the dishonour of a bill. This chapter is fundamental for understanding credit transactions and their documentation in accounting.

Learning outcomes

Identify and name common negotiable instruments.
Differentiate between a bill of exchange and a promissory note.
State and explain the essential features of a bill of exchange.
Identify the three parties involved in a bill of exchange.
Define and calculate the maturity date of a bill of exchange, including days of grace.
Understand the concept and accounting treatment of a dishonoured bill of exchange.
Identify the two parties to a promissory note.

Topics covered

Paper topics

Negotiable Instruments
Bills of Exchange
Promissory Notes
Parties to a Bill of Exchange (Drawer, Drawee, Payee)
Essential Features of a Bill of Exchange
Maturity of a Bill of Exchange
Days of Grace
Dishonour of a Bill of Exchange
Accounting Entries for Dishonour

Important topics

Distinction between Bill of Exchange and Promissory Note
Essential Features of a Bill of Exchange
Calculation of Maturity Date (including Days of Grace)
Accounting Treatment of Dishonoured Bills

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Questions and Solutions

Q1

Name any two types of commonly used negotiable instruments.

Solution: The two most commonly used types of negotiable instruments are Cheques and Bills of Exchange. These instruments facilitate the transfer of money and are widely accepted in commercial transactions.

Q2

Write two points of distinction between bills of exchange and promissory notes.

Solution: Here are two key points of distinction between a Bill of Exchange and a Promissory Note:

Nature of Instrument: A Bill of Exchange is a written order made by the drawer, directing the drawee to pay a specific sum of money. In contrast, a Promissory Note is a written promise made by the maker to pay a specific sum of money.
Number of Parties: A Bill of Exchange typically involves three parties: the drawer (who writes the bill), the drawee (who is ordered to pay), and the payee (who receives the payment). A Promissory Note involves only two parties: the maker (who promises to pay) and the payee (who receives the payment).

Q3

State any four essential features of a bill of exchange.

Solution: The essential features of a bill of exchange are:

Written Order: It must be in writing, containing a clear order to make payment.
Unconditional Order: The order to pay must be unconditional. It cannot depend on any uncertain event or condition.
Certainty of Amount and Payment: The amount of money to be paid and the date of payment must be certain and clearly stated.
Signed by Drawer: The bill must be signed by the person who makes it (the drawer).
Acceptance by Drawee: The drawee must accept the bill by signing it, signifying their agreement to pay.
Payable on Demand or Fixed Period: The bill can be made payable either on demand (immediately upon presentation) or after the expiry of a fixed period.
Payable to a Certain Person or Bearer: The amount must be payable to a specific person, to their order, or to the bearer of the instrument.
Legal Requirement of Stamp: The bill must be stamped according to the legal requirements of the country where it is made.

(Any four of the above features are sufficient.)

Q4

State the three parties involved in a bill of exchange.

Solution: The three parties involved in a bill of exchange are:

Drawer: This is the person who creates and signs the bill of exchange, ordering the drawee to pay. The drawer is usually a creditor who has granted credit to the drawee and is entitled to receive the money.
Drawee: This is the person on whom the bill is drawn. The drawee is ordered to pay the specified amount to the payee. The drawee must accept the bill to become liable for payment. The drawer has granted credit to the drawee.
Payee: This is the person to whom the payment is to be made. The payee is the person entitled to receive the money specified in the bill. Often, the drawer and the payee are the same person, but they can be different individuals or entities.

Q5

What is meant by the maturity of a bill of exchange?

Solution: The maturity of a bill of exchange refers to the date on which the bill becomes legally due for payment. This date is calculated by adding three days of grace to the due date of the bill.

It is important to note that:

Days of grace are not applicable to bills that are payable on demand or at sight.
When the period of a bill is stated in days, the maturity is calculated in calendar days.
When the period is stated in months, the maturity is calculated by counting the number of months from the date of the bill, and the day of the month in the concluding month corresponds to the date of the bill.
If the calculated maturity date falls on a public holiday, the bill is legally due for payment on the preceding business day.

Q6

What is meant by the dishonour of a bill of exchange?

Solution: A bill of exchange is said to be dishonoured when the drawee fails to make the payment on the maturity date, or when the drawee refuses to accept the bill when it is presented for acceptance. Dishonour signifies that the bill has not been paid as agreed.

When a bill is dishonoured, the liability of the acceptor is restored, and the drawer has the right to take legal action. The accounting entries to record the dishonour of a bill of exchange are as follows:

In the books of the Drawer:

The Drawee's account is debited, and the Bills Receivable account is credited.

Drawee\'s A/c Dr. To Bills Receivable A/c

(Being bill dishonoured)

In the books of the Drawee:

The Bills Payable account is debited, and the Drawer's account is credited.

Bills Payable A/c Dr. To Drawer\'s A/c

(Being bill dishonoured)

Q7

Name the parties to a promissory note.

Solution: There are two parties to a promissory note:

Maker: This is the person who creates the promissory note and makes a definite promise to pay a specified sum of money.
Payee: This is the person to whom the payment is promised and who will receive the money.

Common mistakes

Confusing the parties involved in a bill of exchange (drawer, drawee, payee).
Incorrectly calculating the maturity date, especially when public holidays are involved.
Not applying the 'days of grace' correctly or applying them to bills payable on demand.
Errors in journal entries when a bill is dishonoured.

Revision tips

Memorize the key differences between a bill of exchange and a promissory note.
Practice calculating maturity dates for various scenarios, including those with holidays.
Understand the roles of the drawer, drawee, and payee thoroughly.
Review the journal entries for dishonoured bills of exchange until they are clear.

Practice MCQs

Q1. Which of the following is a commonly used negotiable instrument?

Q2. In a bill of exchange, who is the person that makes the order to pay?

Q3. How many parties are typically involved in a promissory note?

Q4. What are the additional days allowed for payment of a bill of exchange, beyond the due date?

Q5. If a bill of exchange is dishonoured, what happens to the liability of the acceptor?

Frequently asked questions

What are the main types of negotiable instruments discussed in this chapter?

This chapter primarily discusses Bills of Exchange and Promissory Notes as key negotiable instruments, along with mentioning Cheques.

Who are the three parties involved in a bill of exchange?

The three parties are the Drawer (who makes the bill), the Drawee (who accepts and pays the bill), and the Payee (who receives the payment).

What is the significance of 'days of grace' in a bill of exchange?

Days of grace are three additional days allowed after the due date for the payment of a bill of exchange, unless the bill is payable on demand or at sight.

How is the maturity date of a bill of exchange calculated?

The maturity date is calculated by adding the period of the bill to the date of its creation and then adding three days of grace, unless the bill is payable on demand or at sight. If the maturity date falls on a public holiday, the preceding business day is considered the maturity date.

What does it mean for a bill of exchange to be dishonoured?

A bill of exchange is dishonoured when the drawee fails to make the payment on the due date or refuses to accept the bill.

What is the difference between a bill of exchange and a promissory note?

A bill of exchange is an unconditional order by the drawer to the drawee to pay a sum of money to the payee. A promissory note is an unconditional undertaking by the maker to pay a sum of money to the payee. A bill has three parties, while a note has two.

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