Commerce Accountancy · General Awareness

Banking and Cash Transactions

990 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

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.

Multiple choice elements of accounts origin of transactions - source documents and preparation of vouchers meaning, importance and components of voucher bank book and petty cash book source documents

A credit note is issued for cancelling the extra debit or wrong debit.

  1. True

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

A credit is issued by the shopkeeper to the buyer who returns the goods. It is issued to cancel the excess debit or wrong debit or to increase the credit which earlier given, was less. 

Multiple choice elements of accounts origin of transactions - source documents and preparation of vouchers meaning, importance and components of voucher bank book and petty cash book source documents

A debit note is issued when _________________.

  1. Less debit was formerly given

  2. Less credit was formerly given

  3. To cancel the wrong debit

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

A debit note is note which is issued when less debit is given. It signifies the debt paying liability of a person. Debit note is issued to give additional debit and to cancel and extra credit.

Multiple choice elements of accounts origin of transactions - source documents and preparation of vouchers meaning, importance and components of voucher bank book and petty cash book source documents

Debit and credit note provide an advantage of not editing and changing the original documents. To correct the effect given in original document debit and credit notes are issued accordingly separately.

  1. True

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

True. Debit and credit notes are issued to correct the issues of short debit or short credit given earlier. They give an advantage of not editing the books of original entry and still altering the accounts by either debiting or crediting the accounts so needed respectively. 

Multiple choice elements of accounts origin of transactions - source documents and preparation of vouchers meaning, importance and components of voucher bank book and petty cash book source documents

A debit and credit note will always have the amount which is mentioned in words only.

  1. True

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

False. A debit and a credit note will always have the amount mentioned in words as well as figures. Amount is written in words as well as figures for the clarity of the person reading the amount and for confirmation.

Multiple choice elements of accounts origin of transactions - source documents and preparation of vouchers meaning, importance and components of voucher bank book and petty cash book source documents

Which among the following situation will best explain about issuing debit note to a customer:
A) When the amount payable by buyer to seller increases.
B) Return of goods due to bad quality.
C) When the amount payable by buyer to seller decreases.
D) Goods delivered has charged an extra price.  

  1. A and B

  2. B and C

  3. A and D

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

A debit note is a note which is issued when goods purchased are returned by the purchaser to the vendor or in other words when goods are returned by the buyer to the seller. A debit note signifies that the liability of the buyer has been reduced for payment or expense. Whereas a credit note is a note which is issued by the vendor or seller to the purchaser in respect of return of goods. 

Multiple choice business organisation and correspondence negotiable instruments 1 - cheque meaning and types of banks banking and bank transactions bills of exchange, promissory notes and hundis

The person to whom the amount of cheque is payable or paid is called payee.

  1. True

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

The maker of a cheque is called the 'drawer', and the person directed to pay is the 'drawee'. The person named in the instrument, to whom or to whose order the money is, by the instrument directed, to be paid, is called the 'payee'.

Multiple choice business organisation and correspondence negotiable instruments 1 - cheque meaning and types of banks banking and bank transactions bills of exchange, promissory notes and hundis

When a cheque is returned dishonoured, it is recorded in ______________.

  1. Cash column on the credit side

  2. Cash column on the debit side

  3. Bank column on the credit side

  4. Bank column on the debit side.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The dishonored cheque is shown in the debit column of the bank statement.

Multiple choice business organisation and correspondence negotiable instruments 1 - cheque meaning and types of banks banking and bank transactions bills of exchange, promissory notes and hundis

Unpresented cheques are also referred as ___________.

  1. uncollected cheques

  2. uncredited cheques

  3. outstanding cheques

  4. bounced cheques
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Unpresented cheques are cheques that have been issued by a business but have not yet been presented to the bank for payment. They are also known as outstanding cheques.

Multiple choice business organisation and correspondence negotiable instruments 1 - cheque meaning and types of banks banking and bank transactions bills of exchange, promissory notes and hundis

A document which is used to deposit the amount in the bank account is __________.

  1. Withdrawal slip

  2. Pay in slip

  3. Cheque leaf

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

Pay in slip as the name suggests is a slip that is filled by the customer to deposit money in the bank account either by cash or by cheque. The things that need to be filled in a pay in slip are the account details in which the money is to be deposited, amount to be deposited by cash or by cheque, and the signature of the depositor.

Multiple choice business organisation and correspondence negotiable instruments 1 - cheque meaning and types of banks banking and bank transactions bills of exchange, promissory notes and hundis

The pay in slip provided by the bank to the account holder is divided into _____ parts.

  1. 2

  2. 3

  3. 4

  4. 5
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A pay in slip provided by the bank to the account holder is divided into 2 parts. One is the counterfoil being the smaller part of the slip which acts as a documentary evidence of the money deposited in the bank. Whereas the other part being the longer one is kept with the bank having all the details of the customer and is kept for record with the banks.

Multiple choice business organisation and correspondence negotiable instruments 1 - cheque meaning and types of banks banking and bank transactions bills of exchange, promissory notes and hundis

Left hand side of the pay in slip is known as ___________.

  1. Acknowledgment

  2. Folio number

  3. Counterfoil

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

Left hand side of the pay in slip is known as the counterfoil. A pay in slip provided by the bank to the account holder is divided into 2 parts. One is the counterfoil being the smaller part of the slip which acts as a documentary evidence of the money deposited in the bank