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

A person is not called an unpaid seller if

  1. the credit period as per contract is over

  2. a seller has refused to accept payment

  3. cheque received in consideration has been dishonoured

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

Option (2) is correct: If a seller has refused to accept valid tender of price, then he is not called an unpaid seller. In options (1) and (3), he will be called an unpaid seller.

Multiple choice

Greshan's law states that

  1. bad money promotes good money in the system

  2. bad money drives good money out of circulation

  3. good money drives bad money out of circulation

  4. good money promotes bad money in the system
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Gresham's Law states that 'bad money drives out good money' - when two forms of money with the same face value but different intrinsic values circulate together, people will spend the money with lower intrinsic value (bad) and hoard the money with higher intrinsic value (good).

Multiple choice

Bank must refuse payment of a cheque, where

  1. cheque is not dated

  2. where cheque is stale i.e. date has expired

  3. payment has been stopped by the customer

  4. the cheque is not presented during working hours of bank
Reveal answer Fill a bubble to check yourself
C Correct answer
Multiple choice

When a cheque is returned by the bank marked 'Refer to Drawer', this means the drawer

  1. has instructed the bank not to pay the cheque

  2. whishes to be contacted before the cheque is cashed

  3. has improperly completed the cheque and must correct it before payment

  4. had insufficient funds in his account to pay the cheque
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

'Refer to Drawer' is standard banking terminology indicating that the cheque cannot be honored due to insufficient funds in the drawer's account. It instructs the payee to contact the person who wrote the cheque to arrange alternative payment.

Multiple choice

Credit note is an example of

  1. cash voucher

  2. non-cash voucher

  3. source documents

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

 It is a non-cash voucher, since no cash is involved in it ( incoming or outgoing of cash ). It is issued to a customer, if he returns goods.

Multiple choice

In the pass book, the entries are made by

  1. the customer

  2. the bank

  3. both 1 and 2

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

 The bank makes the entries in the pass book for the transactions relating with the customer. On a certain date the pass book and cash book are checked and the differences are tallied.  So, Bank Reconciliation Statement is prepared.

Multiple choice

Which of the following would credit the customer's balance?

  1. Direct deposit into customer's account .

  2. Cheques deposited into bank but not yet collected by bank.

  3. Charges imposed by bank.

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

If there is a direct deposit into customer's balance it would credit his account. Suppose Ramseh deposits Rs. 4,000 in cash into customer's account, it would credit  his account.

Multiple choice

A written documents in support of a transaction is called

  1. Receipt

  2. Credit note

  3. Voucher

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

A voucher is a written document that evidences a business transaction. It serves as the primary source document for recording entries in accounting books. Receipts, credit notes, and memos serve different purposes but vouchers specifically support transaction recording.

Multiple choice

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

  1. Issuing cheques with overdraft facilities with a bank

  2. Cheque bouncing for insufficiency of funds in the account

  3. Issuing a post-dated cheque

  4. Issuing a cheque which is not crossed

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

Cheque bouncing due to insufficient funds is a punishable offence under Section 138 of the Negotiable Instruments Act. The drawer can face imprisonment up to 2 years and/or a fine. This provision was introduced to ensure financial discipline and protect the interests of payees. Other options like issuing post-dated cheques or uncrossed cheques are not criminal offences under normal banking operations.

Multiple choice

The term “Illegal Tender” means

  1. black money

  2. mutilated cheque

  3. dishonoured cheque

  4. none of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Illegal tender refers to counterfeit money or unauthorized currency that cannot be legally used. It is not the same as black money (unaccounted wealth), mutilated cheques (damaged physical cheques), or dishonored cheques (bounced due to insufficient funds).

Multiple choice

After some experience, apprentice bankers can usually begin to discern, though not with absolute certainty, genuine currency notes from fake ones.

  1. genuine currency notes from fake ones

  2. genuine currency notes apart from fake ones

  3. between genuine currency notes and fake ones

  4. among genuine currency notes and fake ones

  5. whether currency notes are fake or genuine
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

'Discern between' is the better construct as it means differentiate between. Hence (3).

Multiple choice

Cash Book records transactions of which nature?

  1. Cash nature

  2. Credit nature

  3. Both cash and credit

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

A cash book is a subsidiary book used to record all receipts and payments made in cash or through a bank. Transactions that do not involve an immediate exchange of cash, such as credit sales or credit purchases, are excluded. It serves as both a journal and a ledger account for cash.