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 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

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.

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

The characteristic feature of imprest system is ___________________.

  1. Fixed amount of cash is allocated to petty cash fund

  2. Cash distributed from petty cash fund is documented with receipts

  3. Both a&b

  4. Petty cash disbursement receipts are everyday replenishments of the petty cash fund
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The imprest system involves maintaining a fixed float (A) and requiring documentation/receipts for all disbursements (B) to justify the replenishment of the fund.

Multiple choice instruments of monetary policy and the reserve bank of india money and banking economics

If a cheque presented to the clearinghouse is returned unpaid for any reason, the banker has to enclose the cheque to a Returning Memo while returning the instrument to the customer. This provision has been prescribed under which of the following?

  1. Negotiable Instruments Act, 1881

  2. Reserve Bank of India Act, 1934

  3. Banking Regulation Act, 1949

  4. RBI Clearing House, Rules
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

According to the Reserve Bank of India Clearing House, Rules which list the basic guidelines for clearing all types of dues of the clearing house, if any cheque presented to the clearinghouse is returned unpaid for any reason, the banker has to enclose the cheque to a Returning Memo which  records all such transactions when he returns the instrument to the account holder or the customer. 

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Closing balance of cash book is _____________ balance.

  1. Debit

  2. Credit

  3. Zero

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

Total of the debit side of the cash book or cash A/c always exceeds its credit side because payments of a business cannot exceed the receipts amount. So, the cash book shows debit balance. When payments are exactly equal to the receipt of the business, it will show zero balance, but it can never show the credit balance. Thus, the cash book will always show debit balance or zero balance.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Credit balance of bank account in cash book shows ______________.

  1. Overdraft

  2. Cash deposited in our bank

  3. Cash withdrawn from bank

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

The debit balance as per the cash book means the balance of deposits held at the bank. Such a balance will be a credit balance as per the passbook. Such a balance exists when the deposits made by the firm are more than its withdrawals.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Total of the debit side of cash book is ___ than the credit side.

  1. More

  2. Equal to

  3. Less

  4. None of these

Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When the total of debit column of the Cash Book (Bank column) is more than the total credit column of Cash Book (Bank column), it is known as debit balance. That is, there is a favourable balance of cash deposited at the bank. When Cash Book balance is given, it is treated as debit balance.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Credit balance shown by a bank column in cash book is ______.

  1. Cash

  2. Overdraft

  3. Cash credit

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

The debit balance as per the cash book means the balance of deposits held at the bank.

It indicates the favourable balance as per cash book or favourable balance as per the passbook. On the other hand, the credit balance as per the cash book indicates bank overdraft.