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

Mr. Ashok Kumar issues a power of attorney in favour of Mr. Amit Kumar on July 31, 2006 and dies on December 03, 2006. Your branch receives (on Dec 26, 2006) through clearing house, two cheques, signed by Mr. Amit Kumar, on June 12, 2006. Which cheque(s) will be paid?

  1. Both of the cheques will be paid, if there is balance in the account.

  2. Both of the cheques will be returned.

  3. Cheque signed by Mr. Ashok Kumar will be paid as the cheque was signed before death.

  4. Cheque signed by Mr. Amit Kumar will be paid as he is alive.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Both of the cheques will be returned because both the cheques are signed by Amit Kumar before the Power of Attorney was transferred. 

Multiple choice

A power of attorney is given on Jan 1, 2016 by X to Y. Y signed 3 cheques dated as Dec 25, 2015, Jan 12, 2016 and Jan 31, 2016. On Jan 17, 2006, his authority is cancelled by X. Cheques are presented for payment on Jan 31, 2006.

  1. Cheque dated Dec 25 and Jan 12 shall be paid.

  2. Cheque dated Jan 12 and Jan 31 shall be paid.

  3. Cheque dated Dec 25 and Jan 12 shall be returned.

  4. All the cheques would be paid.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Only the cheques which are signed after the power of attorney has been transferred will be acceptable.

Multiple choice

Gift cheques can be purchased by

  1. individual customer and non-customer

  2. partnership firms

  3. private limited companies

  4. big corporate houses
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Gift cheques are instruments issued by banks that can be purchased by anyone - both existing customers and non-customers alike. They are typically used as gifts and the purchaser does not need to have an account relationship with the issuing bank.

Multiple choice

Bankers' lien does not apply to

  1. safe custody deposits

  2. bills of exchange entrusted for a specific purpose

  3. documents or properties left in the bank inadvertently

  4. all of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Multiple choice

The drawee of the bank draft has received information about the loss of the draft from the purchaser. The drawee banker should

  1. stop payment

  2. exercise caution

  3. refuse to recognize the notice/information

  4. issue a duplicate draft
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When a banker receives information about a lost draft from the purchaser, they should exercise extreme caution but cannot automatically stop payment without proper procedure and verification. The banker must verify the claim, follow established protocols for lost instruments, and protect both parties' interests while preventing fraud.

Multiple choice

When a customer having fixed deposits with a bank needs urgent money, he should be advised

  1. to close the deposit before the due date

  2. to obtain a loan against the deposit upto the limit allowed

  3. to part withdrawal or use flexi deposit facility

  4. to wait till the due date as fixed deposit cannot be closed before the due date
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When a customer needs urgent money but has fixed deposits, closing before maturity causes interest penalty. The best option is to take a loan against the fixed deposit, which allows the customer to access funds while the deposit continues to earn interest (though loan interest is usually charged at a slightly higher rate than deposit rate).

Multiple choice

A customer requests the banker to issue bearer demand draft. The banker should

  1. issue the bearer demand draft by striking the word 'order' and writing the word 'bearer

  2. refuse to issue the same

  3. request the customer to go the head office

  4. request the head office seeking permission

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Banks generally refuse to issue bearer demand drafts due to security and fraud prevention concerns. Bearer instruments can be cashed by anyone holding them, creating money laundering and theft risks. Bank drafts are typically issued as 'order' instruments payable to a specific payee, with 'bearer' strictly avoided.

Multiple choice

Which of the following is a negotiable instrument?

  1. Fixed deposit receipt

  2. Savings bank account pass book

  3. Cheque

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

A cheque is a negotiable instrument as it meets all requirements: it's in writing, signed by the drawer, contains an unconditional order to pay a specified sum, is payable on demand, and is payable to order or bearer. Fixed deposit receipts, passbooks, and gift coupons do not have negotiability characteristics.

Multiple choice

Addition of names in a fixed deposit receipt can be made

  1. at the request of any of the joint deposit account

  2. at the request of all the four joint deposit account holders

  3. at the request of all the three (or less) joint deposit account holders

  4. none of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Adding names to a fixed deposit receipt requires consent from ALL existing joint holders to protect everyone's interests and prevent unauthorized changes. The option mentioning 'three or less' correctly captures that the requirement is unanimous consent, regardless of whether there are two, three, or more joint holders.

Multiple choice

Pay-in slip is used

  1. for withdrawing the money from a bank account

  2. for depositing the money in a bank account

  3. for deposit of gold or other commodity in a loan account

  4. all of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A pay-in slip or deposit slip is used when depositing money into a bank account. It contains details like account number, deposit amount, and date. The other options are incorrect because pay-in slips are specifically for deposits, not withdrawals or commodity deposits.

Multiple choice

Fraudulent transfer is

  1. void

  2. illegal

  3. immoral

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

A fraudulent transfer is voidable at the option of aggrieved party. It can’t be immoral. It is not void because the transfer is not void. The transfer is also not illegal.

Multiple choice

Debit balance as per passbook means

  1. bank overdraft

  2. cash in hand

  3. cash balance at bank

  4. total sales

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

Debit balance in passbook means cash is drawn more than balance available in bank. So, this option is correct.

Multiple choice

Credit balance in bank passbook means

  1. bank overdraft

  2. favourable balance

  3. total of bank book

  4. balance at cash book

  5. total of cash book
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Credit side means cash is available in bank account which is considered as favourable balance.

Multiple choice

In case the premium payment is made by cheque, then which of the given statements will hold true?

  1. The risk may be assumed on the date on which the cheque is posted.

  2. The risk may be assumed on the date on which the cheque is deposited by the insurance company.

  3. The risk may be assumed on the date on which the cheque is received by the insurance company.

  4. The risk may be assumed on the date on which the cheque is issued by the proposer.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Correct Answer: The risk may be assumed on the date on which the cheque is posted.