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 chemistry chemistry in daily life food spoilage and food preservation methods of preserving food chemicals in food

Currency notes can be marked with an invisible ink. Thieves can be trapped because this ink

  1. Shows up in ultraviolet light

  2. Turns red on adding alkali

  3. Turns blue on adding acid

  4. It attracted by a magnet
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Invisible ink shows up in ultraviolet light.

Modern UV-invisible ink is mainly made by a fluorescent derived from things in nature that glow when exposed to an UV light.

Multiple choice commercial applications meaning and fundamentals of double entry book-keeping double entry system meaning, definition, and advantages of double entry book-keeping meaning, definition, need, objectives and limitations of double entry system introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records

Double entry in cash book is completed when _________________.

  1. Salaries are paid by cheque

  2. Withdrawal of money from bank for personal use

  3. Deposited cash into bank

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

Option C is correct.

Deposited cash into bank Entry will be :-      Bank A/c Dr.
                                                                          To Cash A/c

Deposited cash into bank has effect on both Cash & Bank A/c.

Multiple choice commercial applications meaning and fundamentals of double entry book-keeping double entry system meaning, definition, and advantages of double entry book-keeping meaning, definition, need, objectives and limitations of double entry system introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records

As the book keeper, identify the account to which you will post the following transaction recorded by the Cashier in the cash account:
Rs. 500 paid to buy a cash book and ledger book _________________.

  1. Stationery Account

  2. Accounting books Account

  3. Purchases Account

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

Buying a cash book and ledger book is an administrative expense for maintaining accounting records. Such items are classified as stationery or office supplies.

Multiple choice elements of accounts sub-division of journal - 2 (subsidiary books) sales book or sales journal introduction, meaning, types and advantages of subsidiary books meaning and types of subsidiary books

Petty cash book is a book having record of big payments.

  1. True

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

 Petty cash book is used for recording a large number of small payments such as conveyance, cartage, postage, telegram and other expenses (miscellaneous expenses) which are usually in nature.

Multiple choice elements of accounts sub-division of journal - 2 (subsidiary books) sales book or sales journal introduction, meaning, types and advantages of subsidiary books meaning and types of subsidiary books

For immediate withdrawal of cash from the bank account, withdrawal slip is used by the accountholder.

  1. True

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

Withdrawal slip is used to withdraw cash from the bank. It is the slip that an account holder has to fill to enable him to withdraw money from the bank. It includes the name of the account holder, amount to be withdrawn, account number and date that should be provided at the time of withdrawing money from the bank.

Multiple choice elements of accounts sub-division of journal - 2 (subsidiary books) sales book or sales journal introduction, meaning, types and advantages of subsidiary books meaning and types of subsidiary books

Standing orders are _______________.

  1. Credited in the cash book

  2. Debited in the cash book

  3. Entered in the bank statement

  4. Entered in the petty cash balance
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Standing orders are automatic payments made by the bank on behalf of the customer. These are recorded as credits in the cash book (bank column) because they represent money leaving the account.

Multiple choice elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

The debit balance of the bank account as per the cash book should be equal to the credit balance of the account of the business in the books of the bank. 

  1. True

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

True. 

The debit balance of the cash book (bank column) should be equal to the credit balance in the account of the business in the books of the bank (pass book/ bank statement). This is because, pass book (bank statement) is a copy of the customer's account in the books of bank from the point of view of the bank. So our debit balance is shown as credit balance by them.

Multiple choice elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

Following is not the salient features of bank reconciliation statement: 

  1. Any undue delay in the clearance of cheques will be shown up by the reconciliation

  2. Reconciliation statement will help in finding the person doing any fraud.

  3. Reconciliation is done by the bankers

  4. It helps in finding out the actual position of the bank balance.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A bank reconciliation statement is prepared by the account holder (the business), not the bank, to reconcile their own records with the bank statement.

Multiple choice elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

While preparing a Bank Reconciliation Statement taking the balance as per Cash Book as the starting point, dishonour of Discounted B/R are:

  1. Added

  2. Subtracted

  3. Nor required to be adjusted

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

When a discounted bill of exchange is dishonored, the bank deducts the amount from the account. If starting with the Cash Book balance, this amount must be subtracted to match the bank's records.

Multiple choice elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

Booklet or a Statement which is used to record the banking transaction is known as __________.

  1. Pass book

  2. Cash book

  3. Bank statement

  4. Petty cash book
Reveal answer Fill a bubble to check yourself
A,C Correct answer
Explanation

The booklet or a statement used to record the banking transactions is known as pass book or bank statement. It is prepared by the bank. It shows all the transactions of a customer with the bank in the bank's books.

Multiple choice elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

Pass book is a/an ____________of account holder's transaction with the bank.

  1. extract

  2. estimate

  3. balance

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

A bank maintains records of thousands of customers in its ledgers.

However, a pass book is an extract of all the transactions undertaken by a particular account holder through the bank account maintained by the account holder with the bank. These are the confidential details of a particular account which are provided only to the respective account holder.

Multiple choice elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

________ is a statement which is prepared as on a particular date to reconcile the bank balance as per cash book with balance as per pass book by showing all the causes of difference between the two. 

  1. A bank statement

  2. A bank reconciliation statement

  3. Income Statement

  4. Position statement
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Whenever money is deposited in bank  or withdrawn from bank it is recorded in two places.

  • The pass book maintained by the bank
  • The cash book (bank column ) maintained by the account holder.
These two books are opposites of each other which means if one shows credit balance then the other would reflect a debit balance of the exact same amount. But due to reasons like timing differences the balances of both these books on a particular date do not match.
 Now, it is not practical and feasible for the bank to reconcile the account balances of each and every account holder so, the account holder prepares a bank reconciliation statement for his account maintained in the bank.

Multiple choice elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

A bank reconciliation statement is a _________.

  1. part of cash book

  2. part of financial statements

  3. part of pass book

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

A Bank Reconciliation Statement is an independent statement prepared to reconcile the balance between the bank column of cash book and pass book.

It is neither a part of cash book nor pass book.
A Cash flow statement may be a part of financial statement but not Bank Reconciliation Statement.

Multiple choice elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

A bank reconciliation statement is prepared by __________.

  1. creditors

  2. debtors

  3. bank

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

Whenever money is deposited in bank  or withdrawn from bank it is recorded in two places.

  • The pass book maintained by the bank
  • The cash book (bank column ) maintained by the account holder.
These two books are opposites of each other which means if one shows credit balance then the other would reflect a debit balance of the exact same amount. But due to reasons like timing differences the balances of both these books do not match. 
Now, it is not practical and feasible for the bank to reconcile the account balances of each and every account holder so, the account holder prepares a bank reconciliation statement for his account maintained in the bank.

Multiple choice elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

A bank reconciliation statement is a statement prepared to reconcile________.

  1. cash balance as per cash book and bank balance as per pass book

  2. bank balance as per cash book and bank balance as per pass book

  3. both (A) & (B)

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

Whenever money is deposited in bank  or withdrawn from bank it is recorded in two places.

  • The pass book maintained by the bank
  • The cash book (bank column ) maintained by the account holder.
These two books are opposites of each other which means if one shows credit balance then the other would reflect a debit balance of the exact same amount. But due to reasons like timing differences the balances of both these books do not match.
 Now, it is not practical and feasible for the bank to reconcile the account balances of each and every account holder so, the account holder prepares a bank reconciliation statement for his account maintained in the bank.