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

When discounted bill is honored drawer passes ________journal entry.

  1. No Entry

  2. Cash A/c Dr

    To Bill Receivable A/c

  3. Cash A/c Dr

    To Bank A/c

  4. Drawee A/c Dr

    To Bill Receivable A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When a bill is discounted, the bank becomes the holder. If the bill is honored, the bank collects the money from the drawee. The drawer has already received the cash (minus discount) and has no further entry to make.

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

Drawee Passes __________ journal entry for bill Retained , Discounted or Pledged.

  1. Cash A/c Dr

    To Bill Payable A/c

  2. Cash A/c Dr

    To Bill Receivable A/c

  3. Bill Payable Dr

    To Drawer A/c

  4. No Entry
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The drawee's liability remains the same regardless of what the drawer does with the bill (retains, discounts, or pledges). The drawee only records the payment upon maturity.

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

When bill sent for collection is honor drawer passes __________journal entry.

  1. Cash A/c Dr

    To Bill Receivable A/c

  2. Bill sent for collection A/c Dr

    To Bill Receivable A/c

  3. Bank A/c Dr

    To bill sent for collection A/c

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

When a bill sent for collection is honored, the bank collects the cash and credits the 'Bill sent for collection' account, while debiting the 'Bank' account.

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

When Bill is Dishonored ___________ is Debited in drawers books.

  1. Drawee A/c

  2. Endorse A/c

  3. Bank for Collection A/c

  4. Bill Receivable A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When a bill is dishonored, the drawer must reverse the entry. The drawee is once again made a debtor, so the Drawee's account is debited.

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

On acceptance of bill - the drawee, debit which of these accounts?

  1. Drawer's A/c.

  2. Bills Receivable A/c.

  3. Bills Payable A/c.

  4. Endorse A/c.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In the books of accounts of the drawee (debtor) the following entries of credit purchase & acceptance of bill is passed. 

$1$. Entry for credit purchase $2$. Entry for acceptance of bill  $3$. Net effect of both the entries
  Purchase A/c. ------------------Dr.  Drawer (Creditor) A/c. --------------Dr.  Purchase A/c. ------------------Dr.
 To Drawer (Creditor) A/c.  To Bills payable A/c.  To Bills payable A/c.
In actual only the $1$st & the $2$nd entries are passed the $3$rd entry shown in the table above is just to understand the net effect of these entries. So when the drawee accepts the bill what he does in the real sense is that he shifts the amount of liability from  the  Drawer (creditor) A/c. to Bills payable A/c. And so ultimately what is being reflected in the books of the Drawer(creditor) is that his purchase A/c. is debited withe amount of purchases made and the bills payable A/c. is credited, with the same amount and therefore reflecting as a liability instead of creditor A/c. So in order  to get this desired result, on acceptance of bill the drawee debits the account of the Drawer(debtor). 
Multiple choice commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

Business transaction in which cash is not paid or received immediately is known as ______________.

  1. Cash transaction

  2. Non monetary transaction

  3. Credit transaction

  4. Transaction in kind
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Credit transaction means any transaction by the terms of which the repayment of money loaned  or loan commitment made or payment for goods, services or properties sold or leased is to be made at future date or dates. In other words  credit transaction means goods or services are purchased but the payment will settle in a later date. 

Multiple choice commercial studies basic accounting terms basic accounting terminologies introduction to financial accounting and financial accounts basic accounting terminology meaning and features of balance sheet income-expenditure account meaning, importance and specimen of journal objectives, functions, and importance of accounting stages and functions of accounting qualitative characteristics, objectives and roles of accounting

A post dated cheque bears ______ date.

  1. Past

  2. No

  3. Future

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

A post-dated check (or post-dated cheque) is a check written with a future date. In other words, the date that appears on the check is after the date when the check was written. Even with a future date appearing on the check, the check could clear (be paid from) the bank account prior to that date.

Multiple choice elements of book keeping and accountancy ledger and posting develop the understanding for posting of transactions and balancing of accounts classification of ledger (subdivision of ledger) and balancing of account meaning and importance of ledger

Loan from Mahesh Account is ______________.

  1. An Asset Account

  2. A Liability Account

  3. A Revenue Account

  4. An Expense Account
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A loan taken from someone is an obligation to repay, which constitutes a liability for the business.

Multiple choice elements of book keeping and accountancy ledger and posting develop the understanding for posting of transactions and balancing of accounts classification of ledger (subdivision of ledger) and balancing of account meaning and importance of ledger

Which account is the odd one out?

  1. Interest A/c

  2. Outstanding Interest A/c

  3. Advance Interest A/c

  4. Accrued Interest A/c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Outstanding, advance, and accrued interest are all representative personal accounts (accruals/deferrals). Interest account is a nominal account.

Multiple choice elements of book keeping and accountancy ledger and posting develop the understanding for posting of transactions and balancing of accounts classification of ledger (subdivision of ledger) and balancing of account meaning and importance of ledger

Bank Interest charged Account is ________________.

  1. An Asset Account

  2. A Liability Account

  3. A Revenue Account

  4. An Expense Account
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Bank interest charged is a cost incurred by the business for using banking services, thus it is an expense.

Multiple choice elements of book keeping and accountancy ledger and posting develop the understanding for posting of transactions and balancing of accounts classification of ledger (subdivision of ledger) and balancing of account meaning and importance of ledger

Rent paid to Ram (landlord), it should be credited to __________.

  1. Rent A/c

  2. Ram

  3. Landlord A/c

  4. Cash A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The accounting entry will be :

Rent A/c   Dr.     
  To Ram   A/c
(Being rent paid to ram)
  • Here Rent paid will be credited in Ram's account.

Multiple choice commercial studies money loans from banks and financial institutions introduction to money - barter system owned fund and borrowed fund

Cheque is a _____.

  1. money

  2. legal tender money

  3. optional money

  4. none of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
1. Cheque is an instrument in writing containing an unconditional order, addressed to a banker, sign by the person who has deposited money with the banker, requiring him to pay on demand a certain sum of money only to or to the order of a certain person or to the bearer of the instrument.
2. Optional money refers to non-legal tender money which does not enjoy any statutory backing but it is generally accepted by the people in final payments and in settlements of cash transactions. It consists of credit instruments like bills of exchange, cheques, handiest, etc.
Multiple choice commercial studies money loans from banks and financial institutions introduction to money - barter system owned fund and borrowed fund

Saving deposit does not form part of _________________.

  1. Demand deposit

  2. Time deposit

  3. Board money

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

Time deposits refers to the deposits with the commercial banks which can be withdrawn from the account holder's account after the expiry of a specified period of time. Savings do not form a part of time deposit as it is a part of demand deposit because any amount up to the limit of the credit balance can be withdrawn as per the wish of the account holder. Therefore, savings deposit does not form a part of time deposit. 

Multiple choice commercial applications bases of accounting cash and mercantile system basis of accounting basis of accounting system

Cash cannot be misappropriated by ___________. 

  1. omitting to enter cash received

  2. entering less amount than has been actually received

  3. making fictitious entries on the payments side of the cash book

  4. making fictitious entries on the Receipt book side of the cash
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Misappropriation of cash usually involves under-recording receipts or over-recording payments. Making fictitious entries on the receipt side would actually increase the recorded cash balance, which does not facilitate stealing cash.