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 sub-division of journal - 2 (subsidiary books) introduction, meaning, types and advantages of subsidiary books journal proper or general journal meaning and types of subsidiary books

NSZ. Ltd. makes payments to its sundry creditors through cheques and the cash discount received on these payments is recorded in the triple-columnar cash book. In the event of dishonour of any such cheques, the discount so received should be written back through - 
(i) A debit to discount column of the cash book. 
(ii) A credit discount column of the cash book. 
(iii) A credit to bank column of the cash book. 
(iv) A debit to discount account through journal proper.
(v) A credit to creditor's account through journal proper. 
Select the correct answer from the options given below- 

  1. Only (i) of the above

  2. Only (ii) of the above

  3. Both (i) & (ii) of the above

  4. Both (iv) & (v) of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When a cheque is dishonored, the discount previously recorded must be reversed. This is done by debiting the discount account and crediting the creditor's account through the Journal Proper.

Multiple choice book keeping and accountancy sub-division of journal - 2 (subsidiary books) introduction, meaning, types and advantages of subsidiary books journal proper or general journal meaning and types of subsidiary books

A cheque of Rs.112 received from a debtor recorded twice in the cash book. When the balance as per Cash  Book is the starting point.

  1. Rs. 112 to be added

  2. Rs. 112 to be subtracted

  3. No adjustment is required

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

If a receipt was recorded twice in the Cash Book, the balance is artificially inflated. To correct this when starting from the Cash Book balance, the amount must be subtracted.

Multiple choice book keeping and accountancy sub-division of journal - 2 (subsidiary books) introduction, meaning, types and advantages of subsidiary books journal proper or general journal meaning and types of subsidiary books

A cheque of 3500 received from P. K. Jain a customer, endorsed in favour of P. C. Jain, a supplier. It is to be recorded in _________.

  1. Three Column Cash Book.

  2. Journal Proper.

  3. Bills Receivable Book.

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

An endorsement of a cheque received from a customer to a supplier does not involve the bank account directly in the books of the entity. Such transactions are recorded in the Journal Proper.

Multiple choice book keeping and accountancy sub-division of journal - 2 (subsidiary books) introduction, meaning, types and advantages of subsidiary books journal proper or general journal meaning and types of subsidiary books

A bill receivable of 1000, which was received from a debtor in full settlement for a claim of  Rs. 1100, is dishonoured. It is to be recorded in _______________.

  1. Purchases Return Book.

  2. Bills Receivable Book.

  3. Purchases Book.

  4. Journal Proper (General Journal)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The dishonour of a bill receivable is a non-routine transaction that does not fit into the special journals for sales or purchases. Therefore, it is recorded in the Journal Proper.

Multiple choice book keeping and accountancy sub-division of journal - 2 (subsidiary books) introduction, meaning, types and advantages of subsidiary books journal proper or general journal meaning and types of subsidiary books

While posting in cash payment journal ___________________.

  1. Only the individual accounts are posted

  2. The individual accounts are debited and also the total of the cash column is credited

  3. Only the individual accounts are credited and there is no need to post the total of the cash column

  4. Only individual accounts are credited and the total of the cash column is debited
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

 A cash payment journal is a special journal. Cash payment journal or cash disbursement journal is used to record all cash payments made by the business. All transactions during which you spend funds. For example, if you paid cash to any of your creditors, you would record it in your cash payment journal. Hence, the individual accounts are debited and also the total of the cash column is credited.

Multiple choice book keeping and accountancy sub-division of journal - 2 (subsidiary books) introduction, meaning, types and advantages of subsidiary books journal proper or general journal meaning and types of subsidiary books

A bills receivable received from a debtor is dishonoured on due date will be recorded in _______________.

  1. Purchases Return Book.

  2. Bills receivable Book.

  3. Purchases Book.

  4. Journal Proper (General Journal).
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Similar to the previous question regarding dishonoured bills, this event is recorded in the Journal Proper as it does not involve cash or standard credit sales/purchases.

Multiple choice commercial studies marketing and sales difference between products and services product marketing

If the conversion period is arrived at as 10, it means ____________________.

  1. It takes 10 days to convert the raw materials to finished goods

  2. 10 days cost of production is held on an average as WIP

  3. Raw materials which can be consumed in 10 days are held in WIP.

  4. Both (A) and (B) above

  5. Both (A) and (C) above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Conversion period or work-in-progress (WIP) period indicates the time taken for converting the raw materials to finished goods, it also indicates the number of days the cost of production is held on an average as WIP.

Multiple choice social science employment: growth, informalisation and other issues employment - trends and structure workers and employment sources of income

The gratuity of generally payable in _______________.

  1. Cash

  2. By demand draft

  3. By cheque

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

Gratuity payments can be made through various legal financial instruments, including cash, cheques, or demand drafts, depending on company policy and local regulations.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

When debentures are issued as collateral security, the final entry for recording the transaction in the books is?

  1. Credit Debentures A/c and Debit Cash A/c

  2. Debit Debentures Suspense A/c and Credit Cash A/c

  3. Debit Debentures Suspense A/c and Credit Debentures A/c

  4. Debit Cash A/c and credit the Loan A/c for which security is given

  5. Debit Debentures A/c and credit the Loan A/c for which security is given
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When debentures are issued as collateral security, the standard accounting treatment is to debit the Debentures Suspense Account and credit the Debentures Account to reflect the potential liability without affecting the cash flow of the loan itself.

Multiple choice book keeping and accountancy company accounts - issue of debentures issue of debentures for consideration other than cash types of debentures issue of debentures at par, premium, discount, collateral security and for consideration other than cash

When debenture are issued as collateral security, the final entry for recording the transaction in the books is _______.

  1. Credit debenture A/c. and Debit cash A/c.

  2. Debit debenture suspense A/c. and credit cash A/c.

  3. Debit debenture suspense A/c. and credit debenture A/c.

  4. Debit cash A/c. and credit loan A/c. for which security is given
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A collateral security may be defined as a subsidiary or secondary or additional security besides the primary security when a company obtains a loan or overdraft  from a bank or any other financial institutions. The final journal entry for recording this transaction is:


Debenture suspense A/c     Dr.
            To Debenture A/c

Multiple choice elements of accounts ledger and posting three column cash book three columnar cash book triple column cash book

Balance of petty cash book is posted to ledger ______________.

  1. In the cash account

  2. In the bank A/c

  3. Nowhere

  4. Either (a) or (b).
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A petty cash book is a ledger kept with the petty cash fund to record amounts that are added to or subtracted from its balance. Petty cash should be part of an overall business accounting system that documents how your business moves funds between one account and another and how it spends its money.

Multiple choice commerce international trade types of foreign trade exports and imports import and export procedure

The document containing the guarantee of a bank to honour drafts drawn on it by an exporter is ________.

  1. Letter of Hypothetication

  2. Letter of Credit

  3. Bill of Lading

  4. Bill of Exchange
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Letter of hypothetication written agreement, which authorizes a bank or lender to repossess and sell the pledged item in case of a default.

A letter of credit is a guarantee issued by the importer's bank that it will honour up to a certain amount the payment of export bills to the bank of the exporter.
A bill of lading is a document issued by a carrier to acknowledge receipt of cargo for shipment.It is a conclusive receipt, i.e. an acknowledgement that the goods have been loaded; and it contains or evidences the terms of the contract.
A bill of exchange is a binding agreement by one party to pay a fixed amount of cash to another party as of a predetermined date or on demand. Bills of exchange are primarily used in international trade.

Multiple choice elements of book keeping and accountancy nature of accounts and rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

When a cheque received is endorsed, it must be entered on _____________.

  1. Credit side of the cash book only

  2. Debit side of the cash book only

  3. Both sides of the cash book

  4. No where
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A bearer cheque received from a party and not deposited in the bank, can be given to any third party for making the similar payment to the latter. This is known as endorsement. On endorsement of cheque to the third party the cash column must be reduced so that it gets recorded in the cash column on the credit side of the cash book. It should be noted that when the cheque was received, it must have been recorded in the cash column on the debit (receipt) side of the cash book.

Multiple choice commercial studies cash book and bank related transactions objectives and importance of bank reconciliation statement meaning of petty cash book bank balance, bank overdraft, meaning, and bank reconciliation statement

A bank reconciliation statement is prepared with the balance of __________.

  1. Pass book

  2. Cash book

  3. Both pass book and cash book

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

To reconcile means to find out the differences if any between two or more things and eliminate it. Now, in case of any banking transactions for each deposit or withdrawal the entry is recorded at two places.

  • The pass book maintained by the bank and
  • The cash book maintained by the account holder.

These two books are opposites of each other which means if one shows credit balance then the other would reflect a debit balance of the exact same amount. But due to reasons like timing differences the balances of both these books do not match. 

So, to reconcile the same a bank reconciliation statement is prepared. The aim while preparing a bank reconciliation statement is to take either pass book or cash book  balance as the starting point, to add or deduct certain entries and reach the balance of the other book ie, if cash book balance is the starting point then after reconciling we should reach at pass book balance.