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 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 by is incorrect?

  1. Every payment made by the petty cashier should be supported by evidence.

  2. Regularly petty cashier is reimbursed to make up his cash balance to the imprest.

  3. The petty cash book could be either a subsidiary book or a main book of accounts.

  4. In emergency the petty cashier may give staff loans of small amounts.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Petty cash is intended for small, routine business expenses. Allowing staff to take loans, even small ones, is a misuse of business funds and violates internal control principles.

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

State with reasons whether the following statement is true or false:
The balance in the petty cash book represents the amount spent.

  1. True

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

The balance in a petty cash book represents the cash remaining on hand, not the amount spent. The amount spent is the difference between the initial imprest and the current balance.

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 can be treated as _____________.

  1. register

  2. memoranda book

  3. part of double entry system

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

The petty cash book is a book of original entry that forms part of the double-entry system, as it records cash transactions that are eventually summarized and posted to the general ledger.

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

What is an analytical petty cash book?

  1. Petty cash book formed in columnar form

  2. Petty cash book formed in tabular form

  3. Petty cash book formed In arithmetic form

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

An analytical petty cash book uses multiple columns (tabular/columnar form) to categorize different types of expenses, such as postage, stationery, and travel, for easier posting to the ledger.

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 statements is incorrect?

  1. In emergency the Petty Cashier may give staff loans of small amounts

  2. The Petty Cash Book could be either a subsidiary book or a main book of accounts.

  3. Every payment made by the Petty Cashier should be supported by evidence

  4. Regularly Petty Cashier is reimbursed to make up his cash balance to the imprest
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

As noted previously, using petty cash for staff loans is a violation of financial controls and is not a legitimate use of the fund.

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

If the debit and credit aspects of a transaction are recorded in the cash book it is a:

  1. Contra entry

  2. Simple entry

  3. Double entry

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

Option A is correct .

Contra Entry is an entry which is recorded to reverse or offset an entry on the other side of an account. If a debit entry is recorded in an account, contra entry will be recorded on the credit side and vice-versa.

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

In petty cash book, the system followed ______________.

  1. Accrual system

  2. Impress system

  3. Cash system

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

The imprest system is followed in petty cash book where a fixed amount (imprest) is maintained. The cashier reimburses the amount spent to restore the balance to the fixed imprest level.

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

Where two aspects of transaction are posted in the cash book, such an entry is called _______________.

  1. Double entry

  2. Debit entry

  3. Credit entry

  4. Contra entry
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A contra entry occurs when a transaction affects both the cash and bank accounts, requiring an entry on both sides of the 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

On April 1st 2017, Rs. 1,000 given to petty cashier, he has spent Rs. 860 during the month of April. On June 1st to make the imprest he will receive the cheque for Rs. __________.

  1. Rs. 1,000

  2. Rs. 860

  3. Rs. 1,860

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

Under the imprest system, the cashier is reimbursed for the exact amount spent to restore the fund to its original balance. If 860 was spent, 860 is needed to return to 1,000.

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

Cash book in which the payment side is ruled in suitable columns is ____________.

  1. Petty cash book

  2. Imprest cash book

  3. Analytical cash book

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

Petty cash book in which the payment side is ruled in suitable columns is called as Analytical Petty Cash Book. In this type of petty cash book, on the payment (credit) side, a separate column is provided for each class of common expenses. The number of column depends on the nature of business and type of expenses. A small business will need lessee columns and a large business needs more columns. Expenses that cannot be designated to any class of expenses are entered in the column named sundry expenses.

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

The petty cashier generally works on ______system. 

  1. Balancing

  2. Accrual

  3. Matching

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

Petty cash book is a type of cash book that is used to record minor regular expenditures such as office teas, bus fare, fuel, etc. These small expenditures are usually paid using coins and currency notes rather than checks. The person responsible for spending petty cash and recording it in a petty cash book is known as petty cashier. 


Under imprest system, a fixed amount of money known as float is given to the petty cashier to meet petty expenditures for an agreed period which usually consists of a week or month. 

At the end of agreed period, the petty cashier submits the details of all expenditures incurred by him to the chief cashier. 
The total cash spent by the petty cashier during the period is reimbursed to him and the total cash available to spend at the start of the next period becomes equal to the original sum. Hence, the petty cashier generally works on imprest system.

Multiple choice elements of accounts ratio analysis liquidity ratios accounting ratio's accounting ratios

Which of the following items is not taken into account while computing quick ratio?

  1. Cash

  2. Bank Balance

  3. Bank overdraft

  4. Sundry creditors
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The quick ratio is a financial ratio used to gauge a company's liquidity. The quick ratio is also known as the acid test ratio. The quick ratio compares the total amount of cash and cash equivalents + marketable securities + accounts receivable to the amount of current liabilities.

Multiple choice elements of accounts ratio analysis liquidity ratios accounting ratio's accounting ratios

Which of the following items is not taken into account when computing quick ratio?

  1. Cash.

  2. Bank Balance.

  3. Bank Overdraft.

  4. Sundry Creditors.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Quick Ratio = [Current assets minus Inventory and prepaid expenses] /

                       [Current liabilities minus Bank overdraft/ Cash credit]
Here inventory is considered as less secure than other current assets  and prepaid expenses  as the name suggests are paid in advance for a reason, bank overdraft and cash credit are usually secured against inventory and so all these $4$ items are excluded while calculating quick ratio.

Multiple choice book keeping and accountancy subsidiary books - 2 three column cash book three columnar cash book triple column cash book

Cash book records ________________.

  1. Cash payments

  2. Cash Receipts

  3. Cash payments and cash receipts

  4. Neither cash payments nor cash receipts
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The Cash Book is a specialized journal designed to record all cash receipts on the debit side and all cash payments on the credit side. It is a comprehensive record of cash flow.

Multiple choice commercial studies subsidiary books - 2 three column cash book three columnar cash book triple column cash book

Double entry of which of the following transactions is completed in the Cash Book itself _______________.

  1. Paid rent by cheque

  2. Withdrew from bank for personal use

  3. A cheque received from a customer deposited into bank on the same day

  4. Cash deposited into the bank
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A contra entry occurs when a transaction affects both the cash and bank accounts. Depositing cash into the bank is recorded on the credit side (cash column) and the debit side (bank column) of the same cash book.