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 business organisation and correspondence bank 2 - accounts maintained by a bank functions and services of banks role of banks in economic development and modes of money transfer accounts and other services

A bank draft can be dishonored.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A bank draft can be dishonored- this is a false statement. Bank draft cannot be dishonored. As per the RBI guidelines, validity of a bank draft is 3 months. Bank draft guarantees the underlying funds. A bank draft is often defined as a cheque drawn by a bank on its own funds.

Multiple choice business organisation and correspondence functions of commerical banks other services and modern trends in banking sector types of banks diversified banking functions

State the following statement is True or False:
Request of secretary to the bank not to make the payment of cheque is known as stop payment.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Request of secretary to the bank not to make the payment of cheque is known as stop payment- this is a true statement. This request is made in order to stop the payment of the cheque so that misuse of  the cheque is prevented. This request is to be made by the customer who issued the cheeque.

Multiple choice business organisation and correspondence functions of commerical banks other services and modern trends in banking sector types of banks diversified banking functions
Stop payment letter is usually made to prevent the misuse of the cheque when the cheque is _______.

  1. lost

  2. issued

  3. credit

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

Stop payment letter is usually made to prevent the misuse of the cheque when the cheque is lost. A customer who issued the cheque can write a stop payment letter. This stop payment letter is used to issue in order to stop the misuse of the lost cheque.

Multiple choice business organisation and correspondence functions of commerical banks other services and modern trends in banking sector types of banks diversified banking functions

State the following statement is True or False:
Pay-in-slip is commonly called as a deposit-slip.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Pay-in-slip is also called as a deposit slip. When a person deposits cheque or cash into a bank account, pay-in=slip is filled in. It has the details viz account number, amount, date, etc. Depositor need not be account holder.

Multiple choice business organisation and correspondence bank 1 - definition, kinds, functions and importance other services and modern trends in banking sector types of banks diversified banking functions

Image-based cheque clearing system where the image of the cheque is sent electronically _____________.

  1. RTGS

  2. NEFT

  3. CBS

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

Image-based cheque clearing system where the image of the cheque is sent electronically is known as CTS. The Cheque Truncation System( CTS) can be defined as a process of stopping flow of physical cheque in which electronic image of the instrument is presented during the time of clearing.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the method of recording cash transactions simple cash boook meaning, features and types of cash book

Favourable balance as per cash book means __________.

  1. debit balance in the bank column of the cash book

  2. debit balance in the pass book

  3. credit balance in the bank column in the cash book

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

In accounting, a favorable balance in a cash book means the business has cash in the bank, which is recorded as a debit balance in the bank column of the cash book.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the method of recording cash transactions simple cash boook meaning, features and types of cash book

The balance of the Cash Column is _____________.

  1. Always Debit

  2. Always Credit

  3. Either Debit or Credit

  4. Neither Debit nor Credit
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The cash column in a cash book represents physical cash on hand. Since you cannot have negative physical cash, the balance must always be a debit balance or zero.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the method of recording cash transactions simple cash boook meaning, features and types of cash book

Rent for the month of May received in advance in the month of April will appear on__________________.

  1. payment side (credit) of cash book

  2. receipt side (debit) cash book

  3. No entry

  4. prepaid rent a/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Receiving rent in advance is a cash inflow. Cash inflows are recorded on the receipt (debit) side of the cash book.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the method of recording cash transactions simple cash boook meaning, features and types of cash book

Cash A/c is a ________.

  1. Nominal A/c

  2. Real A/c

  3. Personal A/c

  4. Fictitious A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

An account is a list of business transactions falling under the same description for a given period of time. 

A systematic and summarized record of business  transactions with respect to person, property, loss, gain, income, expense is known as account. An account is generally prepared for one complete year. All accounts other than personal accounts are known as impersonal accounts. 
For instance, Cash A/c, Rent A/c, Wages A/c, Furniture A/c are impersonal accounts. Impersonal accounts are classified as Real A/c and Nominal A/c. An account or property or anything owned and possessed by a business is called Real A/c. In other words, real account is that account which related to assets, objects etc. of the business. 

This account consists assets, and properties which can be seen, touched, measured, purchased ans sold. Cash A/c is a Real A/c as it relates to the property of the business.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the method of recording cash transactions simple cash boook meaning, features and types of cash book

Cheques received but not banked is generally shown in__________column of Cash Book.

  1. Cash

  2. Discount

  3. Bank

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

Cheques received but not yet deposited into the bank are treated as cash on hand until they are banked, so they are recorded in the cash column.

Multiple choice elements of accounts subsidiary books - 2 understand the method of recording cash transactions simple cash boook recording and posting of cash transactions

Rent outstanding for the month of February will appear_________.

  1. on the debit side of the cash book

  2. on the credit side of the cash book

  3. as a contra entry in the cash book

  4. no entry in the cash book
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Outstanding rent is a liability that has not yet been paid in cash. Since no cash has moved, it is not recorded in the cash book.

Multiple choice elements of accounts subsidiary books - 2 understand the method of recording cash transactions simple cash boook recording and posting of cash transactions

One outgoing cheque of Rs. 112 recorded as Rs. 121 in the Cash Book. (Note: This cheque was presented in the Bank). When the balance as per Cash Book is the starting point.

  1. Rs. 112 to be subtracted

  2. Rs. 121 to be subtracted

  3. Rs. 9 to be added

  4. Rs. 112 to be added
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The cash book was overstated by 9 (121 - 112). Since the cash book is the starting point and it is too high, you must subtract the excess or add the difference if the logic is reversed. Wait, if cash book is the starting point and it is recorded as 121 (payment) instead of 112, the cash book balance is 9 less than it should be. Thus, 9 should be added.

Multiple choice elements of accounts subsidiary books - 2 understand the method of recording cash transactions simple cash boook recording and posting of cash transactions

Debit balance in cash book means __________.

  1. Overdraft as per pass book

  2. Overdraft as per cash book

  3. Credit balance as per pass book

  4. Debit balance as per day book
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The debit balance as per the cash book means the balance of deposits held at the bank. Such a balance will be a credit balance as per the passbook. Such a balance exists when the deposits made by the firm are more than its withdrawals.