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 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

Simple petty cash book is not very popular.

  1. True

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

A simple petty cash book is one in which there is only one amount column on its both sides with common date and particular columns. The debit column is used for entering the balance of cash in hand of the petty cashier at the beginning of the period and the amount received from the head cashier. A simple petty cash book is identical to a cash book. Any cash that a petty cashier receives is recorded on the debit or receipts side and any cash that he pays is recorded on the credit or payments side. In this type of Cash book, all the expenses are recorded in one single column. Due to this, postings of all expenses to respective ledger accounts consume a lot of time. Hence, the Simple Petty Cash Book is not popular because separate columns for various expenses are not maintained. 

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________column records receipts.

  1. extreme left hand

  2. extreme right hand

  3. centre column left hand side

  4. centre column right hand side
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In a petty cash book, the receipt of the imprest amount is recorded in the first column on the left side, while payments are recorded in subsequent columns.

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

_________ is the book which is used for the purpose of recording the payment of petty cash expenses.

  1. Cash book

  2. Bank book

  3. Petty cash Book

  4. Miscellaneous Expenses Book
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In every organisation, a large number of small payments such as conveyance, cartage, postage, telegrams and other expenses are made. These are generally repetitive in nature. 

If all these payments are handled by the cashier and are recorded in the main cash book, the procedure is found to be very cumbersome. The cashier may be overburdened and the cash book may be become very bulky. 
To avoid this, large organisations normally appoint one more cashier and maintain a separate cash book to record these transactions. Such a cash book maintained by petty cashier is called petty cash book. It is used for the purpose of recording the payment of petty cash 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

Petty cash may be used to pay ______________________.

  1. The expenses relating to passages and conveyance

  2. Salaries and wages to the manual staff

  3. For the purchase of furniture and fittings

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

Petty cash is used for small, frequent expenses like postage, stationery, conveyance, and tea/coffee.

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 treated as either a memorandum record or as part of the formal double-entry system depending on the accounting practices of the firm.

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

Payments in cash of small amounts like travelling expenses, postage, carriage etc. are recorded in the ________________.

  1. Main Cash book

  2. Petty cash book.

  3. Cash budget

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

Small, frequent payments are recorded in the petty cash book to keep the main cash book uncluttered.

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.