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

Charge for handling paper work is known as

  1. switching charge

  2. administration charge

  3. fund management charge

  4. surrender charge
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Administration charge is the charge for handling paper work and other miscellaneous back office expenses.

Multiple choice

'MICR' technology used for clearance of cheques by banks, refers to

  1. Magnetic Ink Character Recognition

  2. Magnetic Intelligence Character Recognition

  3. Magnetic Information Cable Recognition

  4. Magnetic Insurance Cases Recognition

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

MICR (Magnetic Ink Character Recognition) is a technology used by banks to speed up cheque clearance. Special magnetic ink containing iron oxide is printed with characters (routing numbers, account numbers) that can be read electronically even if overprinted. It prevents fraud and enables automated processing.

Multiple choice

Find the odd one.

  1. MIS Scheme of the Post Office

  2. NSCs

  3. Parcel Registration

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

MIS (Monthly Income Scheme), NSCs (National Savings Certificates), and Bank Deposits are all savings/investment instruments that offer returns. Parcel Registration is a postal service for sending parcels - not an investment or savings product at all, making it the odd one out.

Multiple choice

Which of the following is now a punishable offence by a bank account holder?

  1. Issuing a cheque without signature

  2. If a cheque drawn by him is dishoured for insufficiency of funds in his account

  3. If cheque is not crossed

  4. If apost- dated cheque is issued
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Under Section 138 of the Negotiable Instruments Act, 1881, issuing a cheque that gets dishonored due to insufficient funds is a criminal offense punishable by imprisonment up to 2 years and/or fine. This law protects the credibility of cheques as a payment instrument. Missing signature, uncrossed cheques, or post-dated cheques have different legal implications but are not criminal offenses in the same way.

Multiple choice

What is the correct enty in the books of Accounts for the following transaction? Purchased goods worth Rs. 60,000 from M/s Rameshlal & Co. @ 10% Trade discount & @ 3% Cash discount. Half amount is paid by cheque.

  1. Dr. Purchase a/c 54,000 Cr. Bank a/c 52,380 Cr. Discount rec. a/c 1620

  2. Dr. Purchase a/c 27000 Cr. Bank a/c 25,380 Cr. Discount rec. a/c 1620

  3. Dr. Purchase a/c 54,000 Cr. Bank a/c 26,190 Cr. M/s Rameshlal & Co. 27,000 Cr. Discount rec. a/c 810

  4. Dr. Purchase a/c 54,000 Cr. Bank a/c 27,000 Cr. M/s Rameshlal & Co. 27,000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Half amount is paid on credit and half amount on cash. Cash discount calculated on Rs. 27,000 @ 3%.

Multiple choice

A cheque which has been duly crossed

  1. Is encashed by payee only

  2. Can be credited in account only

  3. Is valid for indefinite time only

  4. Can be encashed across the counter
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A crossed cheque can only be credited to a bank account, not encashed over the counter. This is a security measure to ensure that the funds go to the intended payee's account. Crossed cheques have two parallel lines on the left corner, indicating that they must be deposited into an account.

Multiple choice

The permission given to a bank customer to draw cheques in excess of his current account balance is called ______.

  1. a personal loan

  2. an ordinary loan

  3. discounting a bill of exchange

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

An overdraft is a credit facility where a bank allows customers to withdraw or write cheques for amounts exceeding their actual account balance, up to an agreed limit. It's a flexible borrowing arrangement typically used for working capital needs by businesses and individuals, with interest charged only on the overdrawn amount.

Multiple choice

What does CVV, the 3-digit number mentioned on the back of debit or credit card mean?

  1. Credit Value Voucher

  2. Card Verified by Visa

  3. Card Verification Value

  4. Both 1 and 2

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

The Card Verification Value (CVV*) is an extra code printed on your debit card or credit card. CVV for Visa, MasterCard and Diners is the final three digits of the number printed on the signature strip on the back of the card.

Multiple choice

A cheque is a

  1. promissory note

  2. bill of exchange

  3. hundi

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

A ‘cheque’ is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand, and it includes the electronic image of a truncated cheque and a cheque in electronic form.

Multiple choice

Who among the following is not a party to a cheque?

  1. A drawer

  2. An acceptor

  3. A drawee

  4. A payee
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The following are the parties to a cheque: A drawer: A person who draws a cheque A drawee: A banker of a drawer on whom a cheque is drawn A payee, holder, endorser and endorsee: Same as in the case of a bill

An acceptor is not a party to a cheque.