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 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. the bank

  2. the bank account holder

  3. the government

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Whenever money is deposited in bank  or withdrawn from bank it is recorded in two places.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

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 contra entry in the Cash Book means that:________.

  1. Debit must be in the Bank Account and the credit in the Cash Account

  2. Debit and credit entries are in any folio but in the Cash Book

  3. Debit and credit entries are on the same folio of the Cash Book

  4. Debit must be in the Cash Account and the credit in the Bank Account
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
Contra entry can be:
1.Bank A/c Dr...
To Cash A/c
or
2.Cash A/c Dr...
To Bank A/c
Credit and Debit entries are both taken into consideration into the cash book and not necessarily only bank or only cash entries are reflected.

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

Bank Reconciliation Statement is prepared to arrive at the Bank Balance.

  1. True

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

False. Bank reconciliation statement is prepared to Reconcile the balances as per cash book (bank column) and pass book (bank statement) by identifying the causes of difference between the two for a particular period. it is prepared with the objective of reconciliation and not to arrive at the bank balance.

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

Bank reconciliation sometimes points to the need for adjusting entries. Invariably how should it be done?

  1. The reconciliation of the ending balance per the bank statement to the adjusted cash balance.

  2. The reconciliation of the cash balance per the company records to the adjusted cash balance.

  3. Both a and b

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

Bank statement provided by the bank shows the balance as on date.Hence, bank column of cash book might not reflect all the entries as shown in bank pass book since some entries only reflect in bank pass book.Adjustments are made in business's cash book to arrive at the final balance avaialble with the business.

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

Some of the transaction that is dependent on bank statement are ____________.

  1. collection charges

  2. dividends received

  3. pre-scheduled payments

  4. all of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
  • Collection charges are directly charged by the bank for providing specified services and this amount is charged  completely on the discretion of the bank. This amount can be recorded in the books of accounts only when we have the bank statement and not before that.
  • In case of  date of declaration of dividend and the date of actual receipt of it there would a difference so we need the bank statement for the actual  date of receipt.
  • Pre-scheduled payments are the expense bills to be paid or subscription to be paid on timely intervals. They are scheduled as per the account holders and are therefore executed by the bank automatically. To record such transactions bank statement/pass book is necessary.
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

If the balance as per Cash Book and Pass Book are the same, there is no need to prepare a Reconciliation Statement.

  1. True

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

True. Bank reconciliation statement is prepared to reconcile the differences between the balances as per cash book and pass book. If the two balances match, then there is no need for a 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

Bank reconciliation statement is not prepared to arrive at the bank balance.

  1. True

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

True. Bank reconciliation statement is prepared to reconcile the balances as per cash book (bank column) and passbook (bank statement) by identifying the causes of differences between the two for a particular period. The bank reconciliation statement is prepared with the objective of reconciling the balances and not arriving at the bank balance.

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

Bank reconciliation sometimes points to the need for adjusting entries. Invariably how should it be done? 

  1. The reconciliation of the ending balance per the bank statement to the adjusted cash balance.

  2. The reconciliation of the cash balance per the company records to the adjusted cash balance.

  3. Both a and b

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

Bank statement provides balance as on date. But to determine the exact balance available with the business, it is required for business to prepare bank reconciliation statement while making adjustments in the bank column of cash book.

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 purpose of preparing a Bank Reconciliation Statement is to ___________.

  1. ascertain the difference between the pass book balance and the bank statement balance

  2. correct errors in the cash book or errors in the bank statement

  3. amend the balance of the bank statement of the firm

  4. amend the balance of the cash book of the firm
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A bank reconciliation statement is a vital statement for the business.

It is prepared to reconcile the balance as per the bank pass book and the bank column of cash book. The balance as per bank column of cash book of the business does not contain all the entries and hence with the help of bank statement provided by the bank, all the errors are rectified. This gives a true picture of the balance available with the business.

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

In case of an enterprise having an overdraft facility the bank reconciliation statement treats all the cheques deposited but not cleared in the cash book to be __________.

  1. added

  2. deducted

  3. to be revealed only in pass book

  4. to be revealed only in cash book
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Overdraft facility means that the customer is allowed to withdraw money from his bank account even when the balance is zero. However, this does not affect the way in which the cheques deposited but not cleared are recorded in the cash book. Cheques deposited but not cleared are debited in the cash book (bank column). Thus, even in the case of an enterprise having overdraft facility, the bank reconciliation statement treats all the cheques deposited but not cleared as added.

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

Base of reconciliation statement is_______________.

  1. balance shown in cash book

  2. balance shown in pass book

  3. either a or b

  4. nor a nor b
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Base of a reconciliation statement can either be as per cash book or bank pass book since balances of both the books are considered to know the final balance available with the business.

Bank reconciliation statement consists of all the adjustments along with the transactions recorded in bank pass book and cash book.

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

Bank reconciliation statement points out _______________.

  1. credibility of the balance shown in pass book

  2. saving account

  3. fixed deposit account

  4. recurring deposit account
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A bank reconciliation statement is prepared using cash book which is prepared by the business and passbook which is prepared by the bank. When the balances of these two books are compared and reconciled, the credibility of the balances is established. Since the business prepares the cash book and the bank reconciliation statement and the passbook is prepared by the bank, the business is able to establish the credibility of the balance as per pass book which is not prepared by the business, on the basis of cash book while preparing bank reconciliation statement, which are prepared by it.

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

A bank reconciliation statement is a statement prepared by the business to reconcile the differences in balance as per bank column in the cash book and bank balances as per pass book (bank statement). The passbook is a copy of the customer's account with the bank and it is prepared by the bank. On the other hand, cash book is prepared by the business and bank column of cash book shows all those transactions of the business which are carried out through the bank account. So it is often, that there are differences between these two balances as they are prepared by different entities with different viewpoints which is why bank reconciliation statement is required to Reconcile these differences.

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

How would deposits in transit be handled when reconciling the ending cash balance as per the bank statement to the correct adjusted cash balance?

  1. Added to the balance as per the bank statement.

  2. Subtracted from the balance as per the bank statement.

  3. Added to the balance as per company records.

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

In case of deposits in transit the entry for would have been entered in the cash book due to which the cash book balance would be higher than the pass book balance.

So, while reconciling the ending cash balance as per the bank statement to the correct adjusted cash balance, deposits in transit should be added to the balance as per 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

________ 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 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

A bank reconciliation statement is the specific document used to explain the differences between the cash book balance and the bank passbook balance on a specific date.