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

Directions: Choose the correct option for the given question.

Which of the following transactions is not entered in the amended cash book?

  1. Interest collected and credited by the bank but not entered in cash book

  2. Income tax paid by bank as per standing instructions

  3. Deposited cheque but not collected by the bank

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

A deposited cheque not yet collected is a timing difference between the cash book and pass book, which is handled in the Bank Reconciliation Statement, not by amending the cash book.

Multiple choice

Directions: Choose the correct option for the given question.

Cheque deposited in personal account was entered in business account and dishonour entry was also passed in same account. This will create

  1. less balance in pass book

  2. less balance in cash book

  3. no difference

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

If the entry was made in the business account and the dishonor was also recorded in the same account, the errors effectively cancel each other out, resulting in no net difference.

Multiple choice

Which of the following is not a negotiable instrument?

  1. Cheque

  2. Fixed deposit receipt

  3. Promissory note

  4. Bill of exchange

  5. Demand draft
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Negotiable instruments are written orders or unconditional promises to pay a fixed sum of money on demand or at a certain time. Hence, a fixed deposit (FD) is a financial instrument provided by banks which provides investors with a higher rate of interest than a regular savings account, until the given maturity date. 

Multiple choice

Bank deposits that can be withdrawn without notice are called

  1. account payee deposits

  2. fixed deposits

  3. variable deposits

  4. demand deposits

  5. deposit slip
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A demand deposit is an account with a bank or other financial institution that allows the depositor to withdraw his or her funds from the account without warning or with less than seven days notice.

Multiple choice

Which of the following statements is correct in respect of Credit Card?

  1. While purchasing something, the buyer customer neither pays in cash not gives a cheque to seller

  2. The customer can buy goods on credit through a Credit Card upto a certain limit

  3. Both of the above

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

Credit cards allow transactions without immediate cash or check payment and provide a credit limit for purchases, making both statements correct.

Multiple choice

Your branch has received a garnishee order in the name of your customer having saving bank account with the following transactions. Which among these is not a subject matter of the garnishee order?

  1. An advice ready for dispatch to another branch after debit to the account in payment of cheque

  2. An advice received for a cheque which was sent in collection from another branch but not credited to the account so far

  3. A cheque in clearing, the amount of which has been credited to the account

  4. An amount of Rs. 4000 relating to his wife’s account credited by mi<font size="2">s</font>take to the account of the customer
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The garnishee order does not apply to the cheques, drafts, bills etc, which have been sent for collection by customer and have been credited. But if the amount of the uncleared cheque is credited, then the garnishee order is applicable. 

Multiple choice

Mr. Ashok Kumar issues a power of attorney in favour of Mr. Amit Kumar in July 31, 2012 and dies on December 03, 2012. Your branch receives (on Dec 26, 2012) through clearing house, two cheques, one of which is signed by Mr. Ashok Kumar, on Dec 12, 2012. Which cheque will be paid?

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

  2. Both the cheques will be returned.

  3. Cheques signed by Mr. Ashok Kumar will be paid as the cheques were signed before death.

  4. Cheques 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 the cheques will be returned because Mr. Ashok Kumar died on December 03, 2012 and the cheque is signed on December 12, 2012. Therefore, it can be a fraud case.

Multiple choice

X received a bearer cheque from Y for valuable consideration and in good faith. Actually, Y had stolen this cheque from Z. X would get title of

  1. a holder only

  2. a holder for value

  3. a holder in due course

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

Holder in due course - a person who has received a negotiable instrument in good faith and without notice that it is overdue, that there is any prior claim, or that there is a defect in the title of the person who negotiated it. Thus, X would get the title of holder in due course.

Multiple choice

Cheque truncation can be done by

(a) using MICR data (b) using imaging processing (c) using advanced processing technology

  1. (a) and (b)

  2. (b) and (c)

  3. (a) and (c)

  4. (a) to (c) all
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Cheque Truncation System (CTS) or Image-based Clearing System (ICS), in India, is a project undertaken by the Reserve Bank of India (RBI) in 2008, for faster clearing of cheques. CTS is based on a cheque truncation or online image-based cheque clearing system where cheque images and magnetic ink character recognition (MICR) data are captured at the collecting bank branch and transmitted electronically.

Multiple choice

If holder of a cheque wants to file complaint in a court u/s 138 of NI Act and other related provisions of NI Act, he can do so

  1. within one month from date of cause of a action

  2. within one month from date of returning of the cheque by the collecting bank

  3. within one month of date of receipt of the information about dishonor by the holder

  4. within one month of date of dishonor of the cheque
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The bill provided certain considerable safeguards to ensure that genuine and honest customers of the bank were not harassed. These safeguards included - that no court shall take cognizance of such offence except on a complaint, in writing made to the payee or the holder in due course of the cheque; that such complaint is made within one month of the date on which the cause of action arises; and that no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any such offence.

Multiple choice

If the holder of a cheque removes the crossing in such a way so that the same is not easily detectable (with naked eye) and gets the payment after presenting it at counter of the drawee bank, the latter will get protection u/s … of NI Act.

  1. 89

  2. 118

  3. 131

  4. 87
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Section 89 in The Negotiable Instruments Act, 1881: Where a promissory note, bill of exchange or cheque has been materially altered but does not appear to have been so altered, or where a cheque is presented for payment which does not at the time of presentation appear to be crossed or to have had a crossing which has been obliterated, payment thereof by a person or banker liable to pay and paying the same according to the apparent tenor thereof at the time of payment and otherwise in due course, shall discharge such person or banker from all liability thereon; and such payment shall not be questioned by reason of the instrument having been altered, or the cheque crossed.