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 accounts ledger and posting explain the concept of ledger and its importance in accounting process. introduction to ledgers ledgers

Which is recorded in the purchases ledger?

  1. Cash paid to a creditor

  2. Cash purchases

  3. Cheque received from a debtor

  4. Purchase of fixed assets
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The purchases ledger tracks transactions with creditors. Cash paid to a creditor is a transaction that affects the creditor's account, so it is recorded in the purchases ledger.

Multiple choice elements of accounts ledger and posting explain the concept of ledger and its importance in accounting process. introduction to ledgers ledgers

Which of the following is not a book of prime entry?

  1. Cash book

  2. Returns Inwards Day Book

  3. The Petty Cash Book

  4. The Ledger
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Books of prime entry (or original entry) are where transactions are first recorded, such as the Journal or Day Books. The Ledger is a book of secondary entry where information is posted from the books of prime entry.

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

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

When bill is cancelled Drawee passes Following Entry ______________.

  1. Bill Payable A/c Dr

    To Drawer A/c

  2. Bill Payable A/c Dr

    To Cash A/c

  3. Drawer A/c Dr

    To Bill Payable A/c

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

When a bill is cancelled, the liability for the bill is removed from the books. The drawee debits the Bills Payable account to close the liability and credits the Drawer's account to reinstate the debt.

Multiple choice book keeping and accountancy bills of exchange renewal of the bill retirement and renewal of a bill accounting treatment of bill transaction

At the time of renewal of a bill, interest account is in the books of the drawer. 

  1. Credited

  2. Debited

  3. None of these

  4. Both (a) and (b)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When a bill is renewed, interest is charged to the drawee. For the drawer, this interest is income, and income accounts are credited in the books.