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 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 cheque returned by bank marked "NSF" means that _________.

  1. bank can't verify your identity

  2. there are not sufficient funds in your account

  3. check has been forged

  4. check can't be cashed being illegal reconciliation-statement
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A cheque may be returned by the ban due to many reasons,one of them being there are no sufficient funds in the account.

When there are no sufficient funds the bank would return the cheuqe presented for payment back to the account holder and mark on the cheque "NSF" which means that there are not sufficient funds in your 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 cheque returned by bank marked "NSF" means that __________.

  1. bank can't verify your identify

  2. there are not sufficient funds in your account

  3. cheque has been forged.

  4. cheque can't be cashed being illegal
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A cheque returned by the bank marked NSF means that there are not sufficient funds in your account. This happens when the cheque presented to the bank is of an amount which is more than what is available with you in your bank at that point of time.

In other words, the bounces back and such cheque is known as a bounced 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

If a cheque is written by a firm and is not cancelled by the bank and returned with the month's bank statement, the firm should __________.

  1. adjust the balance in the firm's cheque book to reflect the data that appears in the bank's records.

  2. immediately notify the bank requesting that it correct its records.

  3. consider this cheque as outstanding when preparing the bank reconciliation.

  4. Consider this cheque to be lost and issue a replacement check.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

If a cheque written by a firm is not cancelled by the bank and returned with the month's bank statement, the firm should consider the cheque as outstanding while preparing the bank reconciliation statement. This means that the cheque has been issued but not presented for payment. So, the firm can consider such cheque as issued ( i.e. credited in cash book) but outstanding for payment when preparing bank reconciliation statement.

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

In bank reconciliation statement the account of outstanding cheques is added to _____________ balance of cash.

  1. book adjusted

  2. unadjusted

  3. understand

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

Outstanding cheques or unpresented cheques are those cheques which have been issued by the company but not yet presented for payment by the other party. The amount of such cheques have already been deducted from the cash book by the company accountant. The bank , on the other hand, will credit the bank account only when such cheque has been cleared from the bank. So, while reconciling the balances as per cash book and pass book, the account of outstanding cheques is added to book adjusted balance of cash.

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

The proper treatment of outstanding cheques on a bank reconciliation is to show them as a __________.

  1. addition to the book balance of cash

  2. deduction to the book balance of cash

  3. addition to the bank statement balance

  4. deduction to the bank statement balance
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In case of outstanding cheques the entry for the same would have been entered in the cash book and so the bank statement would be lower than the cash book balance.

So, while preparing a bank reconciliation statement the proper treatment of outstanding cheques is to show then as a addition to the bank statement balance.

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

Balance as per cash book  = Rs.10000, unpresented cheques = Rs. 2000, uncredited cheque = Rs.500, compute the balance as per bank statement .

  1. $Rs.7500$
  2. $Rs.12500$
  3. $Rs.8500$
  4. $Rs.2500$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The reconciliation is as follows :

   Particulars Amount in Rs. 
   Balance as per cash book $10000$ 
 Less Unpresented cheques  $2000$ 
 Add Uncredited cheque  $500$ 
   Balance as per bank statement $8500$
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

Payment done by the account holder through issuing a cheque is entered in :

  1. The pass-book at the time of issuing the cheque

  2. The cash-book at the time of presenting the cheque to the bank for payment

  3. The pass-book at the time of presenting the cheque to the bank for payment

  4. The cash-book when informed by the third party
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.

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

When the balance as per pass book is the starting point, uncollected cheques are ________.

  1. added in the bank reconciliation statement

  2. subtracted in the bank reconciliation statement

  3. not required to be adjusted in the bank reconciliation statement

  4. neither of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In case of uncollected cheques  the entry for the same is already made in the cash book due to which the cash book balance becomes higher. 

So, when the balance as per pass book is the starting point, uncollected cheques by bank are added in the bank reconciliation statement.

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 customer's account in the bank's book

  2. a debtors acoount in pass book

  3. cash column of the cash book

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

A bank statement is a printed record of all the transactions that take place in a customer's account. The bank maintains customers account in its books of account and the same is presented to the customer in the form of a statement to the customer to check balances, additions and subtractions 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

Features of book keeping one.

  1. Mechanical recording

  2. Repetitive recording

  3. Record keeping of all money transactions

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Bookkeeping involves the mechanical, repetitive, and systematic recording of all financial transactions in monetary terms.

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

When the balance as per pass book is the starting point, direct payments by bank are __________ .

  1. added in the bank reconciliation statement

  2. subtracted in the bank reconciliation statement

  3. not required to be adjusted in the bank reconciliation statement

  4. neither of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In case of direct payments by bank the entry for the same is already made in the pass book due to which the pass book balance becomes higher. So, when the balance as per pass book is the starting point, direct payments by bank are added in the bank reconciliation statement.

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

The bank statement shows as overdrawn balance of Rs. 2,000. A cheque for Rs. 500 drawn in favour of a credit has not yet been presented for payment. When the creditor presents the cheque for payment, the bank balance will be ___________ .

  1. Rs. 1,500

  2. Rs. 2,500

  3. Rs. 1,500 (overdrawn)

  4. Rs. 2,500 (overdrawn)
Reveal answer Fill a bubble to check yourself
D 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. 
Hence balance as per pass book is negative 2000 when unpresented cheques are presented the overdrawn balance will be (2500).
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

Which of the following item is not be appear in the Bank Reconciliation Statement if the balance as per Amended Cash Book is taken as the starting point.

  1. Uncollected cheques

  2. Unpresented cheques

  3. A wrong entry in the Pass Book

  4. A correct entry in the Pass Book but not appearing in Cash Book
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

An amended cash book is where all the adjustments are done, the starting point being the balance as per cash book. All the errors in the cash book are adjusted in the same. Hence, a wrong entry in a pass book won't appear in a cash book as it is not an error or omission in the cash book.

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

Which of the following items is not to be adjusted in the Amended Cash Book:

  1. Bank Charges and Interest charged by Bank

  2. Interest allowed and direct Payments by Bank

  3. Direct payment by our Debtors into the bank

  4. A wrong entry in the Pass Book.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

An amended cash book is where all the adjustments are done, the starting point being the balance as per cash book. All the errors in the cash book are adjusted in the same. In the given question all the errors are cash book errors or omission except a wrong entry in the pass book. This error has to be adjusted in the passbook and not the cash book.

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

When balance as per Cash Book is the starting point which of the following is added:

  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

 Unpresented cheques must be deducted from the balance as per Bank Statement when reconciling it with Cash Book. Therefore, unpresented cheques must be added to the balance as per Cash Book when reconciling it with the Bank Statement.