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 banking and bank transactions nature, advantages and types of cheques bills of exchange and promissory note meaning and types of banks bills of exchange, promissory notes and hundis cheques

One outgoing cheque of Rs. 112 sent to a creditor but omitted to be recorded 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 added to cash book

  2. Rs. 112 to be subtracted from cash book

  3. No adjustment is required

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

This is an error of omission. In the given question a cheque of rupees 112 has been omitted to be entered. When balance as per cash book is the starting point the adjustments are to be made in the cash book hence Rs 112 is to be subtracted from the balance of cash book.

Multiple choice business organisation and correspondence banking and bank transactions nature, advantages and types of cheques bills of exchange and promissory note meaning and types of banks bills of exchange, promissory notes and hundis cheques

A crossed cheque is always payable across the bank counter.

  1. True

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

False. A bearer cheque is always payable across the bank counter. A cross cheque is a cheque which has to be directly deposited in the bank account of the person so mentioned. It cannot be made payable over the counter.

Multiple choice business organisation and correspondence banking and bank transactions nature, advantages and types of cheques bills of exchange and promissory note meaning and types of banks bills of exchange, promissory notes and hundis cheques

When balance as per Pass Book is the starting point which of the following is subtracted _______________.

  1. Uncollected Cheques

  2. Unpresented Cheques

  3. Direct payments by Bank

  4. Interest Charged by Bank
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When balance as per passbook is the starting point adjustments are to be made in the passbook. Unpresented cheques are the cheques which are issued to a person and he/she has not presented it for payment. In this case the cash book is credited by the cheque issued and passbook is not. So the cash book balance is less than passbook, hence unpresented cheques are subtracted from the passbook balance. 

Multiple choice business organisation and correspondence banking and bank transactions nature, advantages and types of cheques bills of exchange and promissory note meaning and types of banks bills of exchange, promissory notes and hundis cheques

When balance as per Cash Book is the starting point which of the following is subtracted ________________.

  1. Uncollected Cheques

  2. Unpresenred cheques

  3. Direct Deposits by customers

  4. Interest Allowed by Bank
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When balance as per cashbook is the starting point adjustments are to be made in the cashbook. Uncollected cheques are the cheques which are deposited in the bank but not cleared by the bank or not credited in the bank account. In this case the cash book is debited by the cheque deposited and passbook is not so the cash book balance is more than passbook, hence uncollected cheques are subtracted from the cashbook balance so that both the books come at par.

Multiple choice business organisation and correspondence banking and bank transactions nature, advantages and types of cheques bills of exchange and promissory note meaning and types of banks bills of exchange, promissory notes and hundis cheques

When balance as per Pass Book is the starting point which of the following is added ______________.

  1. Uncollected cheques

  2. Unpresented cheques

  3. Direct Deposits by customers

  4. Interest Allowed by Bank
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When balance as per passbook is the starting point adjustments are to be made in the passbook. Uncollected cheques are the cheques which are deposited in the bank but are not yet cleared by the bank or credit in the account. In this case the cash book is debited by the cheque deposited and passbook is not so the cash book balance is more than passbook, hence uncollected cheques are added from the passbook balance to bring both the books at par.

Multiple choice business organisation and correspondence banking and bank transactions nature, advantages and types of cheques bills of exchange and promissory note meaning and types of banks bills of exchange, promissory notes and hundis cheques

Withdrawal of Cash from Bank for personal use should be credited to ________________.

  1. Cash Account

  2. Bank Account

  3. Drawings Account

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

When cash is withdrawn from the bank, the bank balance decreases. According to the rules of accounting, a decrease in an asset (bank) is credited.

Multiple choice business organisation and correspondence banking and bank transactions nature, advantages and types of cheques bills of exchange and promissory note meaning and types of banks bills of exchange, promissory notes and hundis cheques

Withdrawal of cash from Bank should be debited to _______________.

  1. Cash Account

  2. Bank Account

  3. Drawings Account

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

When cash is withdrawn from the bank, the cash balance increases. According to the rules of accounting, an increase in an asset (cash) is debited.

Multiple choice commercial applications banking and bank transactions nature, advantages and types of cheques bills of exchange and promissory note meaning and types of banks meaning, definition and characteristics of promissory note promissory note

For the purpose of attracting the provisions of section 138 of the Negotiable Instruments Act, 1881, a cheque has to be presented to the bank _____________________.

  1. Within a period of six months

  2. Within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier.

  3. Within a period of 15 days from the date on which it is drawn

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

Under the Negotiable Instruments Act, a cheque must be presented within its validity period, which is currently three months in India, or six months as per older statutory references often cited in textbooks.

Multiple choice commercial applications banking and bank transactions nature, advantages and types of cheques bills of exchange and promissory note meaning and types of banks meaning, definition and characteristics of promissory note promissory note

A cheque is drawn only on the bank in which the drawer has his account. But the bill of exchange can be drawn on _______________ including a ___________.

  1. any person; bank

  2. drawee; payee

  3. drawee: drawer

  4. payee: drawer
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A cheque is specifically drawn on a bank, whereas a bill of exchange is a more general instrument that can be drawn on any person, including a bank.

Multiple choice commercial applications banking and bank transactions nature, advantages and types of cheques bills of exchange and promissory note meaning and types of banks meaning, definition and characteristics of promissory note promissory note

Which one of the following is 'Not' the feature of a cheque?

  1. It is an unconditional written order by the maker to pay.

  2. The written order is to a specified bank.

  3. It specifies the amount to be paid in figures and words.

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

All listed options (unconditional order, specified bank, amount in figures/words) are standard features of a cheque. Therefore, none of the options are 'not' a feature.

Multiple choice commercial applications banking and bank transactions nature, advantages and types of cheques bills of exchange and promissory note meaning and types of banks meaning, definition and characteristics of promissory note promissory note

Crossing of a cheque effects the ___________________.

  1. Negotiability of the cheque

  2. Mode of payment on the cheque

  3. Both a and b

  4. Transferable but does not give a better title to the holder
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Crossing a cheque does not affect its negotiability (it can still be transferred), but it restricts the mode of payment by requiring it to be deposited into a bank account rather than paid over the counter.

Multiple choice commercial applications banking and bank transactions nature, advantages and types of cheques bills of exchange and promissory note meaning and types of banks meaning, definition and characteristics of promissory note promissory note

As per Negotiable Instrument Act $1881$ all of the following are types of the cheque EXCEPT:

  1. Bearer Cheques

  2. Order Cheques

  3. Crossed Cheques

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

Bearer, Order, and Crossed cheques are standard legal classifications under the Negotiable Instruments Act. A 'blank cheque' is a colloquial term for a signed cheque without an amount, not a formal legal category of cheque.

Multiple choice book keeping and accountancy banking transactions and accounts relating to cheque functions and services of modern banking meaning of passbook and cashbook journal entries for transactions through bank and for loans

A bank issued an advice to the account holder whenever it deducts a certain amount from his account.

  1. True

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

True. A bank's advice is like a notice that the bank gives to the customer when any transaction takes place. Hence, bank always issues an advice while money gets deducted from customers account and also when money is deposited in the customer account.

Multiple choice book keeping and accountancy banking transactions and accounts relating to cheque functions and services of modern banking meaning of passbook and cashbook journal entries for transactions through bank and for loans

A bank statement is a copy of ___________.

  1. a creditors account in the bank book

  2. bank column of the cash book

  3. cash column of the cash book

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

A Bank statement is a copy of bank column of the cash book. The businesses maintain cashbook with two column which has one cash column and other bank column. The bank column records all the transactions that take place in the bank account.  

Multiple choice book keeping and accountancy banking transactions and accounts relating to cheque functions and services of modern banking meaning of passbook and cashbook journal entries for transactions through bank and for loans

A bank pass book is a copy of :

  1. The cash column of a customer's cash book.

  2. The bank column of a customer's cash book

  3. The customer's account in the bank's ledger.

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

A Pass Book is a copy of customer's account issued by the bank. The bank maintains the customer accounts in its books of accounts which are further shown in the pass book. Thus passbook is a record of all the transactions that take place in a customers account.