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 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 cheque is deposited ____________ .

  1. bank pass book will be credited

  2. bank pass book will be debited

  3. bank column in cash book is debited

  4. bank column in cash book is credited
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The journal entry in the  books of the account holder when a cheque is deposited is as follows :

Bank A/c. ................................Dr.
To Receivable A/c.
So, as seen from above entry the bank column in the cash book would be debited when a cheque is deposited.

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

lf a cheque received is further endorsed, it must be entered on both sides of the Cash Book.

  1. True

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

True. Cash book is debited when cash comes in and credited when cash goes out. So, when we receive the cheque, cash book is debited. And, when we further endorse the cheque, the cash book is credited. Thus, endoresed cheque appears on both sides 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

What is true about a reconciliation Statement? It is a statement _________.

  1. sent by the bank when we have made and error

  2. sent by the bank when we the account is overdrawn

  3. drawn up by the bank to verify the cash book

  4. drawn up by us to verify our cash book balance with the bank statement balance
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Bank does not send any statement like a 'reconciliation statement' but only provides a 'bank statement'/ 'bank pass book' which gives us the details of transactions undertaken during the period. In fact, bank reconciliation statement is prepared by the business, only to verify the balance as per bank column of cash book and bank statement.It is an important statement for the business.

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 error results in unadjusted cash book balance?

  1. Outstanding cheques

  2. Unpresented cheques

  3. Deposit in transit

  4. Omission of Bank charges
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

An unadjusted cash book balance is such balance in which the items only accounted in pass book have not been adjusted yet. 

Omission of bank charges results in unadjusted cash book balance as it has already been accounted in the pass book but not 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

It is not true for bank reconciliation statement :

  1. That the bank balance as per cash book and pass book are same.

  2. Prepared on a particular date

  3. A single transaction is recorded both in bank pass book as well as bank cask book

  4. The transaction in the cash book one recorded as per client new point
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Bank reconciliation statement is prepared to to reconcile the balances as per cash book (bank column) and pass book (bank statement) by identifying the causes of differences between the two for a particular period. If the two balances match, then there is no need for bank reconciliation statement. So, it is true for a bank reconciliation statement, that it is prepared on a particular date or a single transaction is recorded both in bank passbook as well as in bank cash book or all that the transaction recorded in cash book is as per the client view point. But, but it is not true for a bank reconciliation statement that the balance as per cash book and passbook are same as when the two balances are same, bank reconciliation statement is not required.

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 proper treatment on the bank reconciliation of a note collected by the bank for the depositor is to show it as an _________.

  1. addition to the balance as per cash book

  2. deduction from the balance as per cash book

  3. deduction from the balance as per pass book

  4. addition to the balance as per pass book
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In case when the bank collects a note for the depositor the entry for the same would have been entered in the bank statement and so the cash book balance would be less than the bank statement balance.

Therefore, the proper treatment on the bank reconciliation of a note collected by the bank for the depositor is to show it as an addition to the balance as per 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

In bank reconciliation statement the account of outstanding cheques is added to ____  book balance of cash.

  1. Adjusted

  2. Unadjusted

  3. Understand

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

Outstanding cheques are those cheques which have been issued for payment by the business to its suppliers or creditors but have not yet been presented for payment. This means they have been received in the cash book by crediting the cash book. So, in bank reconciliation statement, the account of outstanding cheques is added to adjusted to book balance of cash.

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

Overdraft balance as per cash book will be _________________.

  1. shown in minus column of bank reconciliation statement

  2. shown in 'plus' column of bank reconciliation statement

  3. will be carried forward for next period

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

Overdraft means we have taken a loan from the bank. It is indicated by negative or credit balance in the bank column of the cash book. It is shown in the 'plus' column of the cash book, all the causes of differences are accommodated to arrive at the other balance in order to reconcile the two differences at the time of preparing bank reconciliation statement for a particular period.

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 bookkeeper recorded a cheque at Rupees 340.56 for store supplies. The cheque was recorded by the bank at its correct amount of Rupees 430.65. The bank reconciliation will require a/an ______.

  1. addition to balance of cash book

  2. deduction from balance of cash book

  3. addition to bank statement balance

  4. deduction from bank statement balance
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In the present case the cash book balance is more than the bank statement balance by $Rs. 90.09 (430.65 - 340.56) $ as the payment is recorded at the wrong amount by the book keeper.

So, the bank reconciliation would require deduction of $Rs. 90.09 from the cash 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

For the purpose of bank reconciliation statement, only the Rs.column of the cash book is to be considered by the _________.

  1. Cash

  2. Bank

  3. Cash and Bank

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

'Reconciliation' between the cash book and the bank statement is the purpose of Bank reconciliation.

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 the debit side of pass book implies.

  1. Withdrawal

  2. Deposit

  3. Expenses

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

'Withdrawal' is money withdrawn by the business from the bank account from the available balance.

Debit side is 'Withdrawal' and credit side is 'Deposit' as per the bank statement/ bank pass book.
A debit entry in bank pass book is a credit entry in the cash book of the business 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

Which of the following is true about bank reconciliation statement - 

  1. Bank reconciliation statement need not to be prepared where the balance of cash book and pass book matches.

  2. Bank reconciliation statement is to be prepared necessarily as per the Income tax Act, 1961.

  3. Bank reconciliation statement is prepared on yearly basis

  4. Bank reconciliation statement is to be prepared and supplied by bank.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A bank reconciliation statement is prepared to reconcile the differences between the balance as per cash book (bank column) and balance as per pass book (bank statement by identifying the causes of differences between the two. So, in the case where the balance of cash book and pass book matches, it need not be prepared. Also, it is not required to be prepared by any act or the bank. It is prepared by the business (accountant) as per the time period it deems fit.

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 balance of both the cashbook and the passbook can be because of.

  1. Errors in recording the entries either in the cash-book or pass-book

  2. Omission of same entry in both cash-book and pass book

  3. Debit balance of cash book is the credit balance of pass-book

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

Errors can also be made by the bank and hence it is not necessary only the business preparing cash book shall make errors.

The difference is important to be known between the cash book and pass book to know the errors and frauds during the period in both cash book and pass book.
If something is omitted to be recorded in both the books, it may not be know since there would be not base to reconcile.

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 is/are cause of difference of balance between cash book & the pass book?

  1. Cheque deposited into bank and collected by bank

  2. Dishonour of cheques/bill discounted

  3. Cheques received and entered in the cash book deposited into the bank on which bank has collected the amount

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

Of the given options, event of  dis-honoured cheques and discounting of bill is reflected in the pass book first and not in the cash book since it is dependent on happening of an event.

In case of option (a), the cheque so deposited is first recorded in the cash book and then reflected in bank pass book, in case of option (c), cheques received are first recorded in cash book after which they are deposited into the bank, for which the bank has collected an amount initially, all theses are recorded in cash book after which they are reflected on clearance in the bank 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 is/are cause of difference of balance between cash book & the pass book?

  1. Errors committed in recording transactions by the firm

  2. Errors committed in recording transactions by the bank

  3. Either (A) or (B)

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

Errors may be committed not only by the firm but also the bank of the account holder. The difference between cash book and pass book can be due to errors in any of these which may not allow them to tally and these errors or frauds may reflect in bank reconciliation statement.