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 accountancy accounting for bills of exchange transaction nature, advantages and types of cheques meaning, definition and characteristics of promissory note promissory note

A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.

  1. True

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

According to Section 6 of the Negotiable Instruments Act, 1881, a cheque is defined as a bill of exchange drawn on a specified banker and payable on demand.

Multiple choice accountancy accounting for bills of exchange transaction nature, advantages and types of cheques meaning, definition and characteristics of promissory note promissory note

Taking in care of Negotiable Instrument Act. $1881$, which of the following is the essential for a cheque?

  1. It should contain conditional order

  2. It must not signed by drawer

  3. Cheque is not payable on demand

  4. It is payable to specified person
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A cheque must be an unconditional order to pay a certain sum of money to a specified person or the bearer, signed by the drawer.

Multiple choice accountancy accounting for bills of exchange transaction nature, advantages and types of cheques meaning, definition and characteristics of promissory note promissory note

In case of a bill of exchange, the drawee is entitled to have three days for making payment of the bill but in case of a _____________ is always payable on demand.

  1. promissory note

  2. cheque

  3. bills of exchange

  4. bank draft
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A cheque is always payable on demand. Therefore, no days of grace are allowed to the banker for payment. In case of a bill of exchange, the drawee is entitled to have three days for making payment of the bill and these extra days are known as grace days.

Multiple choice accountancy accounting for bills of exchange transaction nature, advantages and types of cheques meaning, definition and characteristics of promissory note promissory note

________  of the Negotiable Instrument Act, 1881 defines, ''A cheque is a bill of exchange drawn on a specified banker and not expressed to be payble otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.''

  1. Section 8

  2. Section 6

  3. Section 5

  4. Section 10
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

According to Section 6, of the Negotiable Instruments Act, 1881, the term cheque is defined as “a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.”

Multiple choice accountancy accounting for bills of exchange transaction nature, advantages and types of cheques meaning, definition and characteristics of promissory note promissory note

The Negotiable Instruments Act, 1881 has recognised an _____________ also as a cheque.

  1. virtual cheque

  2. accommodation bill

  3. bearer cheque

  4. electronic cheque
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Negotiable Instruments (Amendment) Act, 2002, introduced the concept of an electronic cheque, which is a cheque drawn in electronic form.

Multiple choice accountancy accounting for bills of exchange transaction nature, advantages and types of cheques meaning, definition and characteristics of promissory note promissory note

 A cheque does not include the electronic image of a truncated cheque and a cheque in the electronic form.

  1. True

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

Section 6 of the Negotiable Instruments Act explicitly includes electronic images of truncated cheques and cheques in electronic form within the definition of a cheque.

Multiple choice accountancy accounting for bills of exchange transaction nature, advantages and types of cheques meaning, definition and characteristics of promissory note promissory note

Cheque is as _______________.

  1. Promissory note

  2. Bill of exchange

  3. Both a and b above

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

A cheque is a specific type of bill of exchange drawn on a specified banker and is always payable on demand. It is not a promissory note, which is an unconditional promise to pay.

Multiple choice accountancy accounting for bills of exchange transaction nature, advantages and types of cheques meaning, definition and characteristics of promissory note promissory note

If the words "not negotiable' are used with special crossing in a cheque, the cheque is _______________.

  1. Not transferable

  2. Transferable

  3. Negotiable under certain circumstances

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

The words 'not negotiable' on a crossed cheque do not restrict the transferability of the cheque; they merely prevent the holder from having a better title than the transferor. Therefore, the cheque remains transferable.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

Petty Cash Book may be treated as a ___________________.

  1. Part of the double entry system

  2. Merely as a memoranda book

  3. Either (A) or (B)

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

A petty cash book can be viewed as a memorandum record for small expenses or as part of the formal double-entry system depending on the organization's accounting policy.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

Which of the following statement is false?
The petty cash book  ____________. 

  1. is a book of prime entry

  2. records cheques paid and received

  3. is written up using petty cash receipts and petty cash vouchers

  4. records cash received and paid
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The petty cash book is used for small cash payments. It does not record cheques, which are handled in the main cash book or bank book.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

Debiting the petty cash book with the exact amount spent in the previous period is an example of _______________.

  1. Contra entry

  2. Imprest system

  3. Going concern

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

The imprest system is an accounting method where the petty cash balance is restored to a fixed amount at the start of each period by reimbursing the exact amount spent.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

When Petty Cash is advanced to the Petty Cashier, the main cashier will record it on the debit side of Cash Book.

  1. True

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

When the main cashier advances money to the petty cashier, it is a payment from the main cash book, so it is recorded on the credit side of the main cash book.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions understand the concept of imprest system petty cash book bank book and petty cash book

Which of the following transactions should be entered in petty cash book?

  1. Salary payments

  2. Stock issued

  3. Subscriptions

  4. Travelling expenses
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The petty cash book is a formal summarization of petty cash expenditures, sorted by date. In most cases, the petty cash book is an actual ledger book, rather than a computer record.