JAIIB Exam 2025 – AFM Important Questions MCQs Quiz-8

01/03/2025

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JAIIB Exam 2025 AFM Important Questions MCQs Quiz-8

JAIIB Exam Quiz 2025: The JAIIB exam is scheduled for 2025 by IIBF. Here, we are providing JAIIB AFM MCQ-based quizzes on a regular basis. You can attempt the quizzes regularly to prepare for the upcoming JAIIB exam. The quizzes will be provided module-wise and unit-wise. You can attempt the JAIIB AFM quizzes from the links below and improve your preparation by practicing regularly. These quizzes will help you boost your score in the JAIIB exam and guide you to clear the exam on your first attempt.

Q.1 Which of the following statements is correct regarding a Bill of Exchange as defined under Section 5 of the Negotiable
Instruments Act?
A) It must be an oral agreement between two parties.
B) It contains an unconditional promise to pay a certain sum of money.
C) It involves three parties: the drawer, the drawee, and the payee.
D) It can be issued only by a bank

Q.2 Which of the following correctly describes the roles of the three parties in a Bill of Exchange?
A) The drawer is the person who accepts the bill and promises to pay; the drawee is the person who draws the bill; the payee is the person who receives the money.
B) The drawer is the person who draws the bill; the drawee is the person on whom the bill is drawn and who is liable to pay; the payee is the person who is entitled to receive the payment.
C) The drawer is the person who pays the bill; the drawee is the person who receives payment; the payee is the bank processing the transaction.
D) The drawer is the person who issues the bill on behalf of the bank; the drawee is always the Reserve Bank of India (RBI); the payee is the government.

Q.3 Which of the following correctly differentiates a Promissory Note from a Bill of Exchange?
A) A Promissory Note is written by the creditor, while a Bill of Exchange is written by the debtor.
B) A Promissory Note involves three parties, while a Bill of Exchange involves only two parties.
C) A Promissory Note is an unconditional undertaking by the maker to pay, whereas a Bill of Exchange is an order by the creditor to the debtor to make a payment.
D) A Promissory Note must always be drawn in favor of a bank, while a Bill of Exchange can be drawn in favor of any individual.

Q.4 Which of the following statements correctly differentiates a Bill of Exchange from a Cheque?
A) A Bill of Exchange is always payable on demand, whereas a Cheque can be payable at a future date.
B) A Cheque is always drawn on a specified banker and is payable on demand, whereas a Bill of Exchange may or may not be drawn on a banker and can be payable at a future date.
C) A Bill of Exchange requires the acceptance of the drawee before payment, whereas a Cheque does not require acceptance.
D) Both B and C.

Q.5 Under the Negotiable Instruments Act, which of the following statements is incorrect regarding the distinction between a Bill of Exchange and a Cheque?
A) A Cheque must be drawn on a banker, whereas a Bill of Exchange can be drawn on any party.
B) A Cheque does not require a stamp duty, whereas a Bill of Exchange (except for demand bills) requires one.
C) A dishonored Cheque can attract criminal liability under Section 138 of the Negotiable Instruments Act, whereas dishonor of a Bill of Exchange does not lead to criminal liability.
D) A Bill of Exchange is always a negotiable instrument, whereas a Cheque is not.

Q.6 Which of the following statements best defines a Holder in Due Course (HDC) under the Negotiable Instruments Act?
A) A person who possesses a negotiable instrument and is entitled to receive payment, regardless of how the instrument was obtained.
B) A person who obtains a negotiable instrument for valuable consideration, before maturity, and without knowledge of any defect in the title of the previous holder.
C) A person who holds a negotiable instrument after its maturity but has no knowledge of any prior fraud.
D) Any bank or financial institution that accepts a negotiable instrument for clearing and settlement.

Q.7 Under the Negotiable Instruments Act, which of the following is the most accurate consequence of the dishonour of a bill of exchange?
A) The holder must immediately present the bill to the Reserve Bank of India for compensation.
B) The holder can sue all prior parties, including the drawer, drawee, and endorsers, for non-payment.
C) The bill automatically converts into a promissory note, and the drawee is given an extension to pay.
D) The dishonoured bill becomes invalid, and no legal action can be taken against the parties involved.

Q.8 Which of the following statements is true regarding the retirement of a bill of exchange?
A) The drawee must pay the full amount along with interest if the bill is retired before its due date.
B) The bill can be retired only if the drawer provides a written request for early payment.
C) The drawee may receive a rebate (discount) for making the payment before maturity.
D) Retirement of a bill is considered a form of dishonour under the Negotiable Instruments Act.

Q.9 Which of the following statements best describes an Accommodation Bill under the Negotiable Instruments Act?
A) A bill drawn and accepted without any consideration, purely to assist another party in obtaining credit or funds.
B) A bill that is issued by a bank to provide short-term financing to businesses.
C) A bill that must be drawn on a bank and is always payable on demand.
D) A bill that is backed by collateral and issued for commercial trade transactions.

Q.10 Which of the following is the primary function of a Notary Public in the context of Negotiable Instruments?
A) To provide legal representation to the drawee in case of dishonour of a bill.
B) To record and certify the dishonour of a negotiable instrument through a formal protest.
C) To issue negotiable instruments on behalf of the government.
D) To mediate disputes between the drawer and the drawee regarding payment.

Q.11 When a bill of exchange is discounted with a bank, which of the following journal entries is recorded in the books of the drawer?
A) Bank A/c Dr. (With discounted value) Discount A/c Dr. (With discount amount) To Bills Receivable A/c (With full face value)
B) Bills Receivable A/c Dr. To Bank A/c
C) Bank A/c Dr. To Bills Payable A/c
D) Bills Payable A/c Dr. To Discount A/c

Q.12 If a bill of exchange retained by the drawer (not discounted or endorsed) is dishonoured on the due date, what is the correct journal entry in the drawer’s books?
A) Bills Receivable A/c Dr. (With bill amount) To Drawee’s A/c (With bill amount)
B) Drawee’s A/c Dr. (With bill amount) To Bills Receivable A/c (With bill amount)
C) Bills Payable A/c Dr. To Bank A/c
D) Drawee’s A/c Dr. To Bank A/c

Q.13.If the drawee is unable to pay the bill on the due date and requests the drawer to renew it by issuing a new bill, what is the correct journal entry in the drawer’s books for ancellation of the old bill?
A) Bills Receivable A/c Dr. (With bill amount) To Drawee’s A/c (With bill amount)
B) Drawee’s A/c Dr. (With bill amount). To Bills Receivable A/c (With bill amount)
C) Bills Payable A/c Dr. To Bank A/c
D)Drawee’s A/c Dr. To Discount A/c

Q.14 If the drawee pays off the bill before its due date, what is the correct journal entry in the drawer’s books?
A) Bank A/c Dr. (With bill amount) To Bills Receivable A/c (With bill amount)
B) Bills Receivable A/c Dr. To Drawee’s A/c
C) Bank A/c Dr. (With reduced amount) Rebate A/c Dr. (With rebate amount) To Bills Receivable A/c (With full bill amount)
D) Drawee’s A/c Dr. To Bills Receivable A/c To Discount Received A/c