Commerce Accountancy · General Awareness

Banking and Cash Transactions

990 Questions

This collection covers essential concepts related to banking and cash transactions. It includes questions on outstanding cheques, petty cash, bank reconciliations, and negotiable instruments. These topics are highly relevant for accounting exams and test practical financial knowledge.

Bank reconciliation statementsCheques and noting chargesPetty cash usageNegotiable Instruments ActCash book entriesStamp Duty Act

Banking and Cash Transactions Questions

Multiple choice

The salary of Rs. 10,000 is paid by cheque, but is entered on the credit side of bank column by Rs. 1, 00,000 in the Two - Columnar Cash Book. How to rectify this mistake in the Two - Columnar Cash Book assuming that the entry is made in the correct side of cash book?

  1. Rs. 90,000 is to be entered in the debit side of bank column.

  2. Rs. 90,000 is to be entered in the credit side of bank column.

  3. Rs. 90,000 is to be entered in the debit side of bank column and Rs. 90,000 is to be entered in the credit side of cash column.

  4. Rs. 90,000 is to be entered in debit side of cash column.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This is correct. The salary is paid by cheque of Rs. 10,000. Hence, it would decrease the bank balance by Rs. 10,000. Thus, Rs. 10,000 is to be entered in the credit side of bank column, but Rs.1, 00,000 is entered in the credit side. Therefore, Rs. 90,000 is entered in excess in the credit side (Rs. 1, 00,000 - Rs. 10,000 Rs. = 90,000). So, Rs. 90,000 is to be entered in the debit side to rectify the mistake made.

Multiple choice

The bill of Rs. 2,000 received from our customer was dishonoured on due date. The bill was discounted by us before and Rs. 100 was noting charge. On the dishonour of bill, the entry was made in the credit side of bank column as Rs. 2,000. How will we make amendments in our cash book to rectify this mistake?

  1. Rs.100 is to be entered in credit side of bank column.

  2. Rs.100 is to be entered in debit side of bank column.

  3. Rs. 2,100 is to be entered in credit side of bank column.

  4. Rs.100 is to be entered in the credit side of cash column.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This is correct. When the bill is dishonoured on due date, which was discounted before the payment of the bill due is to be made to bank along with noting charge. The amount of bill is of Rs. 2,000 and noting charge is of Rs. 100. Hence, total is (Rs. 2,000 + Rs. 100 = Rs. 2,100). So, Rs. 2,100 is to be entered in credit side of bank column, but we have entered only Rs. 2,000. Thus, further Rs. 100 is to be entered in credit side of bank column (Rs. 2,100 - Rs. 2,000 = Rs.100 )

Multiple choice

The reason for preparation of Bank Reconciliation Statement is to know the difference between which of the following?

  1. The balance as per cash column of cash book and bank column of pass book.

  2. The balance as per the bank column of both the pass book and the cash book.

  3. The balance as per the bank column of pass book and cash column of pass book.

  4. The balance as per the last entry of passbook and balance as per cash column of cash book.

  5. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Bank Reconciliation statement is statement, which reconciles balance of cash book with that of pass book bank statement, and it shows reasons for the difference between the two.

Multiple choice

The cash book showed an overdraft of Rs. 2000, but the pass book made up to the same date showed that cheque of Rs. 100, Rs. 75, Rs. 125 respectively had not been presented for payment and the cheque of Rs. 500 paid into the account had not been cleared. What will be the balance as per pass book?

  1. Rs. 1200

  2. Rs. 1800

  3. Rs. 2200

  4. Rs. 800

  5. Rs. 2000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Credit balance as overdraft per cash book = Rs 2000, (+) cheque deposited but not cleared = Rs 500 (-) cheque deposited but not presented for payment (100 + 75 + 125) = Rs 300 Balance as per pass book = Rs 2200.

Multiple choice

If Rs. 10000 deposited in bank account was mistakenly entered twice in the cash book, what will be the correct adjustment in the cash book?

  1. Rs. 10000 will be credited to the cash book.

  2. Rs. 10000 will be debited from the cash book.

  3. Rs. 20000 will be credited to the cash book.

  4. Rs. 20000 will be debited from the cash book.

  5. No adjustment is required.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Rs 10000 will be credited in cash book as the entry has been made twice. So to balance the amount, credit entry of the same amount needs to be made.

Multiple choice

Debit balance as per cash book of Sohan Brothers Enterprises as on 31.12.1999 is Rs. 1400 cheque deposited but not cleared amounts to Rs. 100, and cheque issued but not presented of Rs. 150. The bank allowed interest amounting to Rs. 50 and collected dividend of Rs. 50 on behalf of Sohan and Brothers enterprise. What should be the balance as per pass book?

  1. Rs. 1500

  2. Rs. 1600

  3. Rs. 1650

  4. Rs. 1550

  5. Rs. 1400
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Bank Reconciliation Statement Debit balance as per cheque book Rs 1400 (-) cheque deposited but not cleared Rs 100(+) cheque issued but not presented Rs 150 (+) bank allowed interest Rs 50 (+) dividend collected on behalf of Sohan Brothers Enterprise Rs 50. Balance as per pass book Rs 1550.

Multiple choice

What will be the reconciliation for interest charged by bank when balance as per cash book is the starting point?

  1. Added in bank reconciliation statement

  2. Subtraction in bank reconciliation statement

  3. Not required to be adjusted

  4. Interest will be paid separately, no entry is required.

  5. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Pass book balance decreases by interest charged by bank, which is yet to be recorded in cash book. Hence, this entry needs to be subtracted in bank reconciliation statement.

Multiple choice

Which of the following do(es) not constitute stolen property?

  1. An ingot made out of stolen ornaments

  2. If the stolen gold-made ornaments are sold, then the cash obtained thereof

  3. If a stolen hundred rupee note is changed into ten rupee note or a cheque is cashed

  4. All of the above

  5. Both 2 and 3
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

It can be said that property into or for which the stolen property has been converted or exchanged is not stolen property. When the property remains the same in substance, then it doesn’t cease to be stolen property.

Multiple choice

In banking, a Pay In Slip

  1. Means a slip through which a person can deposit money in his account

  2. Means a slip through which a person can issue cheque from his account

  3. Is also called a withdrawal slip

  4. Must essentially contain IFSC code

  5. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A Pay In Slip is a deposit slip used to credit money into a bank account. It contains details like account number, deposit amount, date, and depositor's signature. A withdrawal slip (option C) is used to take money out, and cheques (option B) are issued through cheque books, not pay-in slips. IFSC codes are essential for electronic transfers, not pay-in slips.

Multiple choice

Which of the following statements is not correct regarding cheque in banking?

  1. It is a type of bill of exchange.

  2. It is a non-negotiable instrument.

  3. There are four main items on cheque.

  4. Parties to regular cheques generally include a drawer and a payee.

  5. Cheques have been in decline for some years, both for point of sale transactions and for third payments.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A cheque is a negotiable instrument, not a non-negotiable one. The defining feature of a cheque as a bill of exchange is its negotiability - it can be transferred to another party by endorsement and delivery. Option A correctly identifies it as a bill of exchange, and option D correctly references the drawer and payee parties that exist in negotiable instruments. Option B's claim that cheques are non-negotiable is fundamentally incorrect.

Multiple choice

Which of the following is incorrect about demand draft?

  1. It is the type of cheque.

  2. It is the medium of account clearance.

  3. In the case of demand draft, the bank is the drawer.

  4. The principles of cheque clearance do not apply to demand draft.

  5. None of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Demand draft is a negotiable instrument issued by banks, and while similar to cheques, it has distinct characteristics. In a demand draft, the issuing bank is the drawer, and it serves as a medium for account clearance between banks. Cheque clearance principles DO apply to demand drafts in terms of presentment, payment, and clearance processes, making option D the incorrect statement it claims to be.

Multiple choice

MICR is used to input data from ____.

  1. order form

  2. time sheet

  3. forms

  4. cheques
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

MICR (Magnetic Ink Character Recognition) is specifically designed to read characters printed in magnetic ink, primarily used on bank cheques for automated processing. The special ink allows machines to read account numbers and routing information even if overprinted. It's not used for order forms, time sheets, or generic forms.

Multiple choice

To get the previous voucher, we must press

  1. Page Up

  2. Page Down

  3. F2

  4. Ctrl + A
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

On pressing the Page Up button to get the previous voucher, the previous voucher will appear. For instance, if we have to get the voucher Contra, which is before Debit Note Voucher, we have to press the Page Up button.

Multiple choice

Withdrawing of Rs. 5,000 by cheque from Andhra Bank for personal use will be shown in

  1. Receipt voucher

  2. Contra voucher

  3. Journal voucher

  4. Payment voucher
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

It will be shown in Contra voucher as withdrawing of Rs. 5,000 by cheque from Andhra Bank as transfer of money from bank to the firm or business and such entries are shown in contra voucher. It is immaterial whether we use that money for our personal use or any other use.