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

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

  1. Interest credited or debited by bank, not entered in the cash book

  2. Direct collections on behalf of customers

  3. Direct payments made by the bank on behalf of the customers

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

If anything is left to be entered in the cash book (incomplete recording) , it might not show a true picture and will not lead to tallying of both the books.

Direct transactions of payment or collection are also not reflected in the cash book first but in the bank pass book and hence it would also not lead to tallying of both the books.

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 to know the causes for the difference between ___________________.

  1. the balances as per cash column of Cash Book and the Pass Book

  2. the balance as per bank column of Cash Book and the Pass Book.

  3. the balance as per bank column of the Cash Book and balance as per cash column of Cash Book

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

Bank reconciliation statement is prepared to know the causes of difference between the balance as per bank column of the cash book and the passbook. This is because, both of these accounts show same transactions but with different point of views. The cash book is prepared with the point of view of the customer and the passbook is prepared with 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

When balance as per pass book is the starting point, interest allowed by bank is _________.

  1. added

  2. subtracted

  3. not required to be adjusted

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

Interest allowed by bank would lead to increase in the bank balance but, it would not be entered in the cash book until and unless the account holder views it in his pass book. 

So when the balance as per pass book is the starting, interest allowed by bank is subtracted in the bank reconciliation statement to reach 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

When drawing up a Bank Reconciliation Statement, if you start with a debit balance as per the Bank Statement, cheques issued but not presented for payment should be __________.

  1. added

  2. deducted

  3. not required to be adjusted

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

Debit balance as per bank statement means that it is an bank overdraft and that the cash book would be having a credit  balance. When cheque is issued but not presented for payment, the entry for the same would be credited in the cash book and so the cash book negative balance would increase by that much amount.

So while drawing up a bank reconciliation statement, with debit balance as per bank statement, cheque issued but not presented for payment should 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

When the balance as per cash book is the starting point, direct deposits by customers are ________.

  1. added

  2. subtracted

  3. not required to be adjusted

  4. neither of the two
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Direct deposits by customers lead to increase in the bank balance , but the entry for the same would be entered in the cash book only after the account holder views it in his pass book.

So, when the balance as per cash book is the starting point, direct deposits by customers are added to reach the 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

The cash book showed an overdraft of Rs. 2000 as 'cash at bank', but the pass book made up to the same date showed that cheques for Rs. 150 and Rs. 125 respectively had not been presented for payment; and the cheque for Rs. 400 paid into account had not been cleared. The balance as per the pass book will be ___________.

  1. $Rs.1600$
  2. $Rs.2675$
  3. $Rs.2125$
  4. $Rs.1875$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Cash Book:

Overdraft balance:                                       ($Rs.2,000$)
Less: Cheques not presented for payment   ($Rs.275$)
Add: Cheque not cleared:                                $Rs.400$
Balance as per bank pass book:                ($Rs.1,875$)

Multiple choice book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

If a bill is. dishonoured, when presented for payment by third party, the drawer will debit:

  1. Acceptors account

  2. Third partys account

  3. Neither of the two

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

When a bill is dishonored, the drawer must reverse the credit given to the drawee. Therefore, the drawer debits the acceptor's (drawee's) account to record the debt again.

Multiple choice book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

When noting charges are paid by the bank at the time of the dishonour of the bill, the drawee credits:

  1. Bank account

  2. Noting charges account

  3. Neither (a) nor (b)

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

In the books of the drawee, the bank or the holder is not credited for noting charges; rather, the drawee debits Noting Charges and credits the Drawer's account. Therefore, neither bank nor noting charges account is credited by the drawee.

Multiple choice book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

At the time of endorsement of a bill, the drawer credits:

  1. The drawee

  2. The endorsees personal account

  3. Bills receivable account

  4. either (A) or (B)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When a bill is endorsed, the drawer transfers the bill to an endorsee. The drawer credits the Bills Receivable account because the asset is leaving their possession.

Multiple choice book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

When the bill is dishonoured, the account debited in the book of drawee _____________.

  1. Acceptor's account

  2. Creditor's account

  3. Bills payable account

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

In the books of the drawee, when a bill is dishonored, the liability that was previously removed (Bills Payable) must be reinstated. Therefore, the Bills Payable account is debited.

Multiple choice book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

If a cheque sent for collection is dishonored, the debit is given to _________.

  1. Suppliers Account

  2. Bank Account

  3. Customers Account

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

At the time of receiving a cheque, customer account was credited, hence if the cheque bounces, a reverse entry has to be passed by debiting the customer account and crediting the bank account.

Multiple choice book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

When a bill deposited for collection by the drawer in his bank is dishonoured, drawer has to credit _____________ A/c.

  1. Drawee

  2. Payee

  3. Bank for collection

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

When Bill sent for collection is Dishonored amount receivable from the Bank is cancelled hence Bank for Collection A/c is Credited.

Multiple choice book keeping and accountancy bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

To record noting charges drawer _______ Cash A/c.

  1. Debits

  2. Credits

  3. No effect

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

In the books of a drawer, noting charges are neither credited nor debited. These noting charges are a loss for the drawee. Thus, he needs to debit it in his accounting book and credit cash A/c. The account of noting charges for a drawer is neither a profit nor a loss.