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 bill of exchange (trade bill) dishonour of a bill dishonour of bills bills of exchange advantages of bill of exchange

X draws a bill on Y for 1,50,000 for 3 months on 1.1.13. The bill is discounted with the banker at a charge of  4,500. At maturity the bill return dishonored. In the books of X, for dishonor, the bank account will be credited by:

  1. 1,45,500

  2. 1,50,000

  3. 1,54,500

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

Upon dishonor of a discounted bill, the bank reverses the transaction by debiting the drawer's account for the full face value of the bill. The discount charged earlier is a separate expense and does not affect the face value reversal.

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

A draws a bill on B for 1,50,000. A endorsed the bill to C. The bill return dishonoured. Noting charges 1,500. B request A to accept the amount at 2% discount by a single cheque. The cheque amount will be:

  1. 1,47,000

  2. 1,48,470

  3. 1,49,500

  4. 1,51,470
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Total amount due = 1,50,000 (bill) + 1,500 (noting charges) = 1,51,500. A 2% discount on 1,51,500 is 3,030. 1,51,500 - 3,030 = 1,48,470.

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 dishonored, when presented for payment by third party, the drawer will debit ___________.

  1. acceptor's A/c

  2. third party's A/c

  3. holder's A/c

  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 reinstate the debt of the acceptor. Therefore, the drawer debits the acceptor's 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

______ bears the expenses of noting charges on dishonourment of a bill of exchange.

  1. Drawer

  2. Endorsee

  3. Drawee

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

A bill of exchange should be duly presented for payment on the date of its maturity. The drawee is absolved of his liability if the bill is not duly presented. Proper presentation of the bill means that is should be presented on the date of maturity to the acceptor during business working hours. To establish beyond doubt that the bill was dishonoured, despite its due presentation, it may preferably to be got noted by Noting Public.It may be noted whosoever pays the noting charges, ultimately these have to be borne by the drawee. The drawee is invariably debited in the drawer's books. This is because he is responsible for the dishonour of the bill and hence he has to bear these expenses.


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 dishonor of the bill, the drawee credits ____________.

  1. bank account

  2. noting charges account

  3. cash A/c

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

When the bank pays noting charges, the drawee owes that amount to the drawer, not the bank. Thus, the drawee credits the drawer's account, not the bank account.

Multiple choice elements of accounts overview of computerised accounting system accounting software concepts and types of computerized accounting system types of accounting software

___________ occurs to ensure that the transaction in terms of delivery of money by ATM has been completed.

  1. Processing

  2. Revalidation

  3. Storage

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

Revalidation in the context of ATM transactions ensures that the requested action (dispensing money) has been successfully completed and recorded by the system.

Multiple choice elements of book keeping and accountancy trial balance develop the skill of preparing trial balance by balance method methods of preparing trial balance preparation of trial balance

Bank overdraft is shown on the _______ side of trial balance.

  1. credit

  2. debit

  3. front

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

Bank overdraft is a liability and liabilities are always having a credit balance. 

Therefore, bank overdraft is to be shown on the credit side of the trial balance. 

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

A cheque for Rs. 7,330 was received from Rao after allowing him a discount of Rs. 70. It was endorsed in favour of Sen in full settlement of Rs. 7,500. The cheque was dishonoured, but no entry for dishonour was passed in the books. If this error located after preparation of final account then which of the following rectification entry is correct? 

  1. Rao A/c Dr. 7,400

    Profit & Loss Adj. A/c Dr. 100

    To Sen A/c 7,500

  2. Rao A/c Dr. 7,400

    Profit & Loss Adj. A/c Dr. 100

    To Suspense A/c 7,500

  3. Rao A/c Dr. 100

    Profit & Loss Adj. A/c Dr. 7,400

    To Sen A/c 7,500

  4. Rao A/c Dr. 100

    Profit & Loss Adj A/c Dr. 7,400

    To Suspense A/c 7,500
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When an endorsed cheque is dishonoured, the debtor (Rao) must be debited for the full amount (7,330 + 70 = 7,400) and the creditor (Sen) must be credited for the full settlement amount (7,500). The difference (100) represents the lost discount, which is adjusted through the Profit & Loss Adjustment account.

Multiple choice elements of book keeping and accountancy book of original record - journal understand the need for journal journals functions, advantages, objects and importance of journal

 Cash discount is ___________.

  1. Given to encourage prompt payment

  2. Amount deducted from list price

  3. Not required to be shown in books of accounts

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

Amount which is deducted by the seller from the amount due at the time of the receipt is called cash discount. it is given to encourage prompt payment.

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 accepted by the acceptor ________.

  1. Bill Payable A/c Dr

    To Drawer A/c

  2. Bill Payable A/c Dr

    To Drawee A/c

  3. Bill Receivable A/c Dr

    To Drawer A/c

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

When the drawee accepts a bill, they incur a liability. They debit 'Bills Payable' (liability increasing) and credit the 'Drawer' (creditor).

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.