Commerce Accountancy · General Awareness

Banking and Cash Transactions

1,011 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

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

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.

Multiple choice

A 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 were not been presented for payment and the cheque of Rs. 500, paid into the account had not been cleared. What would be the balance as per the 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

Hush money

  1. soft money

  2. easy money

  3. money given as bribe

  4. cheque
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

0 0

Multiple choice

As per the provisions of Section 93, when a cheque is dishoroured by non-acceptance or non-payment, the holder

  1. may or may not give notice to the parties whom the holder seeks to make liable thereon

  2. must give notice to the parties whom the holder seeks to make liable

  3. must give notice to the parties whom the holder seeks to make liable, but after noting

  4. must not give any notice to anyone
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

As per the provisions of Section 93 of the Negotiable Instrument Act, when a cheque is dishoroured by non-acceptance or non-payment, the holder must give notice to the parties whom the holder seeks to make liable.

Multiple choice

Under Section 138 of the NI Act, territorial jurisdiction does not arise

  1. where the cheque is issued

  2. in the local limit where the cheque is presented in the bank

  3. where the cheque is dishonoured by the bank

  4. from where the notice to pay the amount is issued
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Section 138 of the Negotiable Instrument Act deals with the dishonour of cheque for insufficiency, etc. of funds in the account.

Multiple choice

Which of the following cheques is/are paid only through a bank account?

  1. Uncrossed cheque

  2. Crossed cheque

  3. Both crossed and uncrossed cheques

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

A crossed cheque is a cheque that has been marked to specify an instruction about the way it is to be redeemed. A common instruction is to specify that it must be deposited directly into an account with a bank and not immediately cashed by a bank over the counter.