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 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 separation of components of mixtures methods of separation elements, compounds and mixtures chemistry

A cheque was suspected to be forged. Which technique could be used to compare the various pigments in the different inks?

  1. Chromatography

  2. Evaporation

  3. Crystallisation

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

A cheque was suspected to be forged. Chromatography could be used to compare the various pigments in the different inks.  Here, different inks will have different affinity for  stationary phase  and solvent (mobile phase).

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.

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 by_________.

  1. Creditors

  2. Bank

  3. Account holder in a bank

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

Whenever money is deposited in bank  or withdrawn from bank it is recorded in two places.

  • The pass book maintained by the bank
  • The cash book (bank column ) 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. Now, it is not practical and feasible for the bank to reconcile the account balances of each and every account holder so, the account holder prepares a bank reconciliation statement for his account maintained in the bank.

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

When a banker collects the bills and credits the amount, pass book overdraft shows ______ balance than before.

  1. lower

  2. profit

  3. higher

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

Pass book overdraft can be simply stated as debit/negative balance in the pass book. Which means the account holder has overdrawn from his account . So when a banker collects bills and credits the amount what happens is that the amount of bill is being received into the account and as a result the liability of the account holder is being reduced. Therefore, after the credit of the bill into the account the pass book overdraft would get reduced and show a lower debit balance than before.

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

Passbook is the statement of account of the customer maintained by the bank. 

  1. True

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

True. Pass book is a copy of customer's account in the books of the bank. It shows all the transactions of a customer with the bank from the point of view of the bank as it is prepared by the bank.

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

Favourable bank balance as per the cash book will be less than the bank pass book balance when there are unpresented cheques for payment. 

  1. True

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

True. 

Unpresented cheques are cheques issued by the business, but not yet presented for payment at the bank. This reduces the balance in cash book as compared to balance as per pass book. Balance in pass book is effected by the bank only when such cheques are cleared by the bank. 

So, favourable bank balance as per cash book will be less than the bank pass book balance when there are in unpresented cheques for payment.