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 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

Entry on credit side of bank pass book implies ___________.

  1. cash withdrawn

  2. cash/cheque deposited in bank

  3. business expenses

  4. personal expenses
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Any entry on the credit side of the pass book implies that the asset of the account holder( the amount reflecting as his bank balance) has increased and the liability of the bank has increased simultaneously. Now, cash/cheque deposited in bank leads to increase in the bank balance of the account holder and hence would be shown on the credit side of the pass 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

On a bank reconciliation which of the following would be added to the balance as per bank statement?

  1. Outstanding unpaid cheques.

  2. Deposits in transit.

  3. Cheques not collected.

  4. Both (B) and (C).
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In case of deposits in transit and cheques not collected , when these items get cleared they lead to increase in the bank balance and at the present moment the pass book balance would be less than the cash book balance.

So, when preparing a bank reconciliation if balance as per bank statement is the starting point then, deposits in transit and cheques not collected would have to be added.

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 pass book is copy of ________.

  1. a customers account in the banks books

  2. cash book relating to bank column

  3. cash book relating to cash column

  4. receipts and payments
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A bank pass book is 'copy' of a customer's account in bank books.

Several accounts are kept with the bank which are recorded in the bank ledgers.
All the transactions between the customer and bank are recorded in bank ledgers , the extract of which is then availed to customers in form of passbook.

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 balances of ________.

  1. cash book

  2. pass book

  3. either cash book or pass book

  4. both cash book and pass book
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Bank Reconciliation statement is prepared in order to reconcile the balance as per the bank pass book and balance as per the cash account maintained by the business in the form of cash book after taking into consideration other aspects like cheques issued but not presented for payment, cash in transit, cheque in transit, etc.

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 is a ____________________.

  1. formal financial statement that lists all of the a firm's bank account balances.

  2. merger of two banks that previously were competitors.

  3. statement sent monthly by a bank to a depositor that lists all deposits, cheques paid and other credits and charges to the depositor's account for the month.

  4. schedule that accounts for differences between a firm's cash balance as shown on bank statement and the balance shown in its personal ledger cash account.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

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

  • The passbook 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

Debit balance as per cash book means _________.

  1. cash balance

  2. overdraft

  3. excess of expenditure

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

When we say that cash book has a debit balance it means that the debit side of the cash book is more than the credit side. On the debit side we record cash receipts and on the debit side we record cash payments. So if there is a debit balance as per cash book then it means there is cash balance with us.

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 help of ______________.

  1. bank statement and bank column of the cash book

  2. bank statement and cash column of the cash book

  3. bank column and cash column of the cash book

  4. none of the above
Reveal answer Fill a bubble to check yourself
A 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 / bank statement maintained by the bank and
  • The bank column of 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

Bank Reconciliation Statement is prepared to ascertain the causes of the difference between ________________ and ______________.

  1. the balance as per the bank column of the cash book, the balance as per pass book

  2. the balance as per the cash column of cash book, the balance as per the pass book

  3. cash, bank column in the cash book

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

Bank reconciliation statement is an exercise to ascertain the difference between the bank statements and cash book maintained by the business.

However, any discrepancies in cash column as per the cash book shall not be reflected since only bank column of the cash book is considered vis-a-vis the pass book in preparing Bank reconciliation statement.

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

While preparing a Bank Reconciliation Statement, if you start with a debit balance as per the cash book, then cheques issued but not presented within the period are _____________.

  1. to be added

  2. to be deducted

  3. not required to be adjusted

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

Cheques issued represent payments made. So when cheques are issued and presented for payment it would lead to decrease in the bank balance as per both  pass book and cash book. But, if cheques are not presented within the period then the bank would not consider those cheques and the bank balance as per pass book would be higher than bank balance as per cash book. 

So, while preparing a bank reconciliation statement, starting with debit balance as per the cash book  if cheques are issued but not presented within the period then they are to be added to reach the balance as per pass 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

Which of the following items appearing on a bank reconciliation would require an adjusting entry?

  1. Outstanding cheques

  2. Deposits in transit

  3. Interest on balance

  4. Adjusted cash balance
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Interest on balance would require an adjusting entry if appearing on a bank reconciliation, because outstanding cheques and deposits in transit are merely time differences which would get cleared automatically and adjusted cash balance is already taken care for the errors. Whereas interest on balance would be cleared only when an entry for the same is passed in 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

The difference in the balances of the cash book and the pass book can be because of _______________.

  1. error in recording the entries either in the cash book or pass book.

  2. same entry recorded in either of the book earlier and in the other book later

  3. debit balance of cash book is the credit balance of pass book.

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

If an entry is recorded in either the cash book or the pass book first and not updated in either of them on a later date, it may lead to a difference between them both.

Also, if there is no consistency or an erroneous recording of transactions  in recording entries in either of the books, it may lead to  a difference between the two.
A debit position as per bank pass book means credit position as per cash book and vice versa.

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

Interest charged by the bank will be deducted when the overdraft as per pass book is the starting point for preparing the bank reconciliation statement to arrive at the balance as per cash book at the end.

  1. True

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

True. Interest charged by bank is an expense for the business. It is credited in the cash book when it is paid by the business, thereby reducing the balance in the cash book (bank column). So, when overdraft as per pass book is the starting point for preparing bank reconciliation statement, interest charged by bank will be deducted to arrive at the balance as per cash book at the end.

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 debit balance in the depositor's cash book will be shown as ___________.

  1. a debit balance in the bank statement

  2. a credit balance in the bank statement

  3. an overdrawn balance in the bank statement

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

A bank statement is an extract from bank ledger and hence it is to be read from bank's view point which shows a credit balance in the pass book.

It is the position of customer in bank records. So if a debit balance is shown in depositor's cash book an opposite position will be shown in the bank books i.e credit 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 pass book is a copy of _________________ .

  1. a customers account in the banks books

  2. cash book relating to discount column

  3. cash book relating to cash column

  4. firms receipts and payments
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A passbook is a copy of customer's account in the bank's books. it is prepared by the bank and shows all the transactions of a customer like deposits, withdrawals, interest payment / receipt etc. with the bank from the point of view of 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

________ is a copy of the clients account in the bank's ledger.

  1. Cash book

  2. Pass book

  3. Cheque book

  4. Pay-in-slip book
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The pass book is just a copy of the account statement as maintained by the bank. So if the pass book reflects a debit balance it means that the account is in the nature of a debtor/receivable for the bank and  it would be the opposite for the account holder. From his point of view he would be having a negative balance in his account and hence a liability/payable.