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

In a petty cash book,

  1. we record small expenses

  2. we record small expense

  3. we record income received

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

A large number of small payments like conveyance, postage etc. are made in every organisation.The main cashier is overburdened if he handles all these payments. So one more cashier is appointed, and he maintains a petty cash book for these small expenses.

Multiple choice

Acceptance is not required in

  1. bills of exchange

  2. promissory note

  3. cheque

  4. Both 2 and 3
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Acceptance is not required both in the promissory note and cheque. So it is the correct answer.

Multiple choice

Contra transaction happens when

  1. cash is deposited in the bank

  2. cash is withdrawn from the bank

  3. both (1) and (2)

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

Contra transaction is in both cases, when cash is deposited in the bank as well as withdrawn from the bank. So the correct answer is option -3.

Multiple choice

Stationery purchased for cash is recorded in

  1. cash book

  2. purchase book

  3. purchase return book

  4. petty cash book

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

Stationery purchased for cash should be recorded in cash book. Petty cash book is required to record petty payments made by petty cashier.

Multiple choice

Which of the following is not a contra entry?

  1. Encashed a cheque

  2. Paid into bank cash from office

  3. Withdrew from bank for office use

  4. Paid into bank cash from personal sources
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Paid cash from personal sources is capital contribution and is not a contra entry. All others are contra entries. Contra entries are those which are debited and credited with cash/bank account only.

Multiple choice

If a cheque received by a customer has not been paid to a bank, but duly entered in cash book, then

  1. passbook balance would be higher than cash book balance

  2. cash book balance would be higher than passbook balance

  3. there would be no difference in the two books

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

Since the cheque has not been deposited, the bank would not add any amount in the customer's balance, but the amount has already been added to the cash book. Hence, cash book balance would be higher than passbook balance.

Multiple choice

If a cheque is deposited in the bank and not yet collected by bank, the pass book will show _____ balance as compared to the cash book.

  1. lower

  2. higher

  3. equal

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

(A)       The cheque recorded in the cash book will increase cash book balance. (B)       The pass book will not show higher balance in this case. (C)       Both the books will show different balances. (D)       The transaction will show different balances.

Multiple choice

Dividend collected by banker on the behalf of customer will ______ the bank overdraft.

  1. increase

  2. decrease

  3. make no effect on

  4. sometimes make effect on
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

(A)       Dividend collected will increase the positive balance. (B)       The collection by banker will reduce bank overdraft. (C)       Dividend collected will increase the positive balance. (D)       Dividend collected will increase the positive balance.

Multiple choice

When the balance as per cash book and pass book is the same, it means that

  1. there is definitely no error in the two books.

  2. there is no error in the cash book.

  3. there is no error in the pass book.

  4. there may still be some error in the two books.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

There may still be some error which may have been compensated and the balance in the two books is the same.

Multiple choice

A BRS helps to locate the differences between

  1. cash book, cash balance and bank balance.

  2. cash book, bank balance and pass book balance.

  3. pass book balance and bank statement.

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

It helps to detect the causes of difference between cash book and pass book balance.

Multiple choice

If a cheque issued to supplier is not presented for payment to the bank, but wrongly shown in the cash column of cash book, then

  1. pass book balance will be higher than cash book balance

  2. cash book balance will be higher than pass book balance

  3. there would be no difference in the two books

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

Since the cheque has not been presented for payment, so the bank would not subtract any amount from customer’s balance and on the other hand, no amount would be subtracted from the cash book because entry has been made in the cash column. So, there is no difference in the two books.