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

Can a customer, from whose account someone has fraudulently withdrawn money, make a complaint before the Banking Ombudsman?

  1. No, as the offence committed, is of criminal nature, FIR has to be filed with the police.

  2. Yes, but if the police authorities receiving the FIR permit filing of the complaint with the Ombudsman.

  3. Yes, as this aspect comes under the powers of the Banking Ombudsman.

  4. No, as the loss caused to the customer is of a civil nature for recovery, civil suit should be filed.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Grounds of complaints pertaining to deficiency in any of the banking services such as:

Non-payment or delay in payment of cheques, drafts, bills etc. Non-issuance of drafts to customers Non-adherence to prescribed working hours by the branches Failure to honour guarantee or letter of credit Claims in regards to fraudulent withdrawals or fraudulent encashment of cheque or a bank draft Complaints for any of the accounts pertaining to delays, non-credit of proceeds to parties accounts Complaints for non-observance of RBI’s directives applicable to rate of interests on deposits or violation of directives on any other matter Complaints from exporters for delays in receipt of export proceeds, handling of export bills, collections of bills etc. 

Multiple choice

N purchased a draft from a bank favoring B. The draft is lost in transit and the first bank needs some formalities to be completed by N for a duplicate draft in lieu of the lost draft. Which of the following is correct if B decides to file a consumer case against the formalities as it is causing delay in payment to him?

  1. B cannot file a case as he is not a consumer of the bank and is not taking any service from the bank.

  2. B cannot file a case as he has not paid the demand draft commission.

  3. B can file a case as his payment is getting delayed due to the bank procedures.

  4. B can file a case as his money is lying in the bank and he is deemed as account holder of the bank.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Where, in the case of loss of demand draft, the necessary formalities as required by the rules of the bank are not complied with, the bank cannot stated to be deficient in service in not issuing a duplicate draft or canceling the draft and making cash payment to the purchaser (complainant). Also, in this case, B is not the consumer of the bank. Thus, he cannot indulge in given preceedings. Also, formalities are required to be done by N. 

Multiple choice

An order cheque of Rs. 55000 is issued by Mr. X in his account favouring M (a minor), who approaches the bank to cash the payment.

  1. Cheque being in favour of a minor cannot be paid

  2. Cheque shall be paid like in other cases

  3. Cheque will be paid if the minor is accompanied by his guardian

  4. Cheque shall be paid, if the guardian provides guarantee for the payment
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Cheque shall be paid, like in other cases, as minors can withdraw the amount. However, minor account holder cannot issue/draw cheque favouring a third party. 

Multiple choice

X deposited Rs. 20000 in his savings bank account for payment of a cheque to be presented after 20 days. The bank credited the amount as Rs. 2000 instead of Rs. 20000 and informed the customer through a statement of account. When the cheque was presented, it was dishonoured due to which the customer suffered losses. Now, X claims damages.

  1. No damages are payable as the customer had office of the mistake.

  2. Customer cannot claim damages. He can claim only the amount he deposited.

  3. Bank is absolved of its liability, when the customer does not point it out.

  4. Bank is liable and continues to be liable even when the mistake is not pointed out by the customer.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Bank is not liable if the details filled by the customer are incorrect. However, in the given case, bank is liable for damages as the error is from the side of the bank. So, the bank is responsible irrespective of the individual pointing out the error or not. 

Multiple choice

Which of the following is correct in connection with the deceased person’s account?

  1. The payment of claim case is to be disposed of within 30 days.

  2. If an amount is received after death for credit to the account, it is to be credited to the account.

  3. If it is a current account, interest at savings bank rate is to be paid from the date of death to the date of payment.

  4. Testate account means where the customer has not left any will.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The claimant is eligible to interest on balance lying in current account of the deceased, interest shall be paid at savings bank deposit rate from the date of death of the depositor to the date of payment (settlement of death claim). 

Multiple choice

A bank can close the account of a customer

  1. where the customer regularly draws cheques without sufficient balance in the account

  2. where the customer issues the cheques and frequently stops payment of such cheques

  3. where the customer acts in a manner detrimental to the interest of the bank

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

All of the above

Multiple choice

Bank B gets a cheque from its customer X (in the name of the payee). The words “pay to Mr. X account no. 3252 0001 0081 3409 Bank A” is starred. It does not bear two parallel lines on its face

  1. the cheque can be collected by Bank B for its customer

  2. the cheque is an uncrossed cheque and its payment can be obtained by Mr. X across the counter from the drawee bank

  3. it is a specially crossed cheque and its payment can be obtained by Bank A only

  4. it is a cheque crossed in favour of two banks. Hence, none of the banks can obtain its payment
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In a special crossing, the name of a banker with or without the words 'not-negotiable' is written on the cheque. Such a cheque is crossed specially to that banker. The effect of special crossing is that the paying banker will pay the amount of the cheque only through the bank named in the cheque.

Multiple choice

X is issued a cheque of Rs. 32000 payable to B or order. The cheque is misplaced and is found by C. C forges B’s signature and endorses it in favour of D, who presents the cheque for payment from the bank, but it is dishonoured.

  1. D can recover the amount from X, B and C.

  2. D can recover the amount from X and B only.

  3. D can recover the amount from C only.

  4. D cannot recover the amount from C only.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A forged instrument has no existence in the eyes of law. A title which never came into existence cannot be improved even if it passes into the hands of a holder in due course. C forges B’s signature on a promissory note and transfers the same to D who takes it in good faith for value. D gets no title of the note even though he is a holder in due course. However, D can recover the amount from C. 

Multiple choice

A cheque of Rs. 10000 issued by Ram Chander, one of your account holders, in favour of Shivaji is stolen by one Radhey Shyam who forges Shivaji’s signature and endorses it in favour of Ganeshi Lal, who obtains the payment from the bank. In this situation, what would be the bank’s position?

  1. Bank will be liable for the forgery.

  2. Bank will be liable only if the drawer proves that the instrument is forged.

  3. Bank will not be liable if Ganeshi Lal agrees to refund the amount.

  4. Bank will get protection available to it under Section 85(1) NI Act and will not be liable for the payment made.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Section 85 in the Negotiable Instruments Act, 1881 Cheque payable to order states

  1. Where a cheque payable to order purports to be indorsed by or on behalf of the payee, the drawee is discharged by payment in due course.
  2. Where a cheque is originally expressed to be payable to bearer, the drawee is discharged by payment in due course to the bearer thereof, notwithstanding any indorsement whether in full or in blank appearing thereon and notwithstanding that any such indorsement purports to restrict or exclude further negotiation.
Multiple choice

A sum of amount was accepted by the cashier of a bank A. However, the cashier fails to account for the amount submitted. Thus,

  1. only cashier will be liable for that

  2. customer depositing the amount will be liable

  3. bank will be liable

  4. Both (1) and (2)

  5. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A bank is bound by the act of negligence of its staff during the course of employment. Thus, where the bank cashier fails to account for the money deposited with him at the counter, the bank would be liable.

Multiple choice

Which of the following is correct about joint deposit account?

  1. When nomination is proposed to be made, it should be made by all of them.

  2. When account is to be closed, it should be done by all even if the account is either or survivor, where specific authority to do so has not been obtained in the account opening form.

  3. Garnishee order will be applicable on this account on pro-rata basis if the orders are received in the name of one of the account holders.

  4. Bank cannot use the right of set-off a loan in the name of one of them.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Issued under Sec. 226(3) of Income Tax Act, 1961 by an Income Tax Officer.

Even though the order is received in a single name, it attaches balance (pro-rata) in any joint account maintained by such person.

Multiple choice

A cheque of Rs. 5000 was issued by X at 3.40 p.m. in favour of Y, who being a very respected customer of the bank, obtained the payment at around 3.50 p.m. after the business hours. X comes at 4.50 p.m. and gives instructions to the bank to stop the payment.

  1. Stop payment instruction cannot be accepted after business hours

  2. Cheque has already been paid, due to which the stop payment cannot be accepted

  3. Bank is liable for the payment made after the business hours

  4. Bank is not liable as the payment has been made before close of the bank, although not in business hours
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Banks are not liable for the transactions done in the working hours, however, in the given case, the transaction was made after working hours and banks are not allowed to do cash related transactions during extended working hours (generally one hour). Thus, in this case bank is liable for the payment made after the business hours.

Multiple choice

If NI act exists, in which of the following circumstances is the bank obliged to pay the cheque drawn by the customer u/s 31?

  1. When the amount differs in words and figures

  2. When there is notice of death of the customer

  3. When an attachment order has been received

  4. When the signatures of the drawer are genuine but differ
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

If the amount undertaken or ordered to be paid is stated differently in figures and in words, the amount stated in words shall be the amount undertaken or ordered to be paid.