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 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

Cash book does not record the _________ transactions.

  1. Cash

  2. Purchase

  3. Credit

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

All transactions in the cash book have two sides: debit and credit. All cash receipts are recorded on the left-hand side as a debit, and all cash payments are recorded by date on the right-hand side as a credit.

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

Cash received in entered on the debit side of cash book.

  1. True

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

The recording of transactions in the cash book takes the shape of a ledger account. Receipts of cash are entered on the debit side and cash payments on the credit side, there is no need of cash account in the ledger books of a firm. 

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

Cash book records transactions relating to receipts and payments.

  1. True

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

Cash book is a book in which all transactions relating to cash receipts and cash payments are recorded. It starts with the cash or bank balances at the beginning of the period. Generally, it is made on monthly basis.

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

A credit balance in the book statement indicates _____________.

  1. Cash at bank

  2. Cash in hand

  3. Bank overdraft

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

A credit balance in the bank statement (often referred to as the pass book) indicates a positive balance, meaning there is cash at the bank. Conversely, in the business's own cash book, a credit balance would indicate a bank overdraft. The term 'book statement' is a common typographical error for 'bank statement'.

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

Which of the following is/are features of cash book ? 

  1. All cash transactions are recorded chronologically in the cash book.

  2. It records only one aspect of transaction i.e cash.

  3. It performs the functions of both journal and ledger at the same time .

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

The cash book records all cash receipts and payments in chronological order, acting as a book of original entry (journal). Since it also serves as the cash and bank accounts, it eliminates the need to maintain separate cash and bank accounts in the ledger. Therefore, it performs the dual role of both journal and ledger, making all the listed statements correct features.

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

Which of the following is the kind of a cash book ? 

  1. Single Column Cash Book

  2. Double Column Cash Book

  3. Three Column Cash Book

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

Cash books can be maintained in various formats depending on the needs of the business. These include a single-column cash book (cash only), a double-column cash book (cash and discount, or cash and bank), and a three-column cash book (cash, bank, and discount). Thus, all of these are recognized types of cash books.

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

Which of the following is/are features of cash book?

  1. It performs the functions of both journal and ledger at the same time.

  2. Cash receipts are recorded in the credit side and cash payments are recorded in the debit side.

  3. IT records two aspect of transaction i.e cash & credit.

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

The cash book acts as both a book of original entry (journal) and a principal book of accounts (ledger), meaning it performs both functions simultaneously. Option B is incorrect because cash receipts are recorded on the debit side and payments on the credit side. Option C is incorrect because the cash book only records cash transactions, not credit transactions.

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

Which of the following is type of cash book ? 

  1. Single Column Cash Book

  2. Two Column Cash Book

  3. Three Column Cash Book

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

A cash book can be classified into different types based on the columns it contains. These include the single-column cash book, the two-column (double-column) cash book, and the three-column cash book. Therefore, all the options listed are valid types of cash books.

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

Which of the following column of the cash book is never balanced ?

  1. Cash column

  2. Bank column

  3. Discount column

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

All cash receipts and discount allowed are recorded on the debit side and all cash payments and discount received are recorded on the credit side as same in single column cash book.

Discount column is not balanced. The total of discount columns is transferred to the Profit and Loss account.

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

The cash book records _______________.

  1. All cash payments

  2. All cash receipts

  3. All cash receipts and payments

  4. Cash and credit sale of goods
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The primary purpose of a cash book is to record all cash transactions, which encompass both cash receipts (on the debit side) and cash payments (on the credit side). It does not record credit transactions, which are instead recorded in other specialized subsidiary books like the sales or purchase books.

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

Contra entries are passed only when __________________.

  1. Simple cash book is prepared

  2. Three-column cash book is prepared

  3. Double-column cash book is prepared

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

Contra entry is passes only when Double column cash book is prepared. 

The reason for making two entries is to comply with the principle of double entry.

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

Rent due for the month of March will appear ___________________.

  1. On the payment side of the cash book

  2. On the receipt side of the cash book

  3. Nowhere in the cash book

  4. As a contra entry
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

'Rent due' refers to outstanding rent that has not yet been paid. Since the cash book only records actual cash receipts and cash payments, outstanding or unpaid expenses do not involve any cash flow and therefore will not appear in the cash book at all.

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

Which of the column of the cash book can have credit opening or closing balance ? 

  1. Cash column

  2. Bank column

  3. Discount column

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

The cash column can never have a credit balance because a business cannot pay out more physical cash than it possesses. However, the bank column can have a credit balance, which represents a bank overdraft (withdrawing more money than is available in the bank account). The discount columns are merely totaled and not balanced.

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

The cash book showed an overdraft of Rs. 3,000 as cash at bank, but the pass book made up on the same date showed that cheques of Rs. 200, Rs. 100 and Rs. 250 respectively had not been presented for payments; and the cheques of Rs. 800 paid into account had not been cleared. The balance as per the cash book will be _____ .

  1. Rs. 2,200

  2. Rs. 4,350

  3. Rs. 3,250

  4. Rs. 2,750
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Starting with a Cash Book overdraft of Rs. 3,000 (-3,000), we add cheques issued but not presented (200 + 100 + 250 = 550) because they have not yet reduced the bank balance, and we subtract cheques deposited but not cleared (800) because they have not yet been added by the bank. This gives -3,000 + 550 - 800 = -3,250, representing an overdraft of Rs. 3,250 as per the Pass Book.

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

Deposit column of pass book showed a wrong entry of Rs. 112. When the balance as per Cash Book is the starting point __________ .

  1. Rs. 112 to be added

  2. Rs. 112 to be subtracted

  3. No adjustment is required

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

A wrong entry in the deposit column of the pass book increases the pass book balance. Since we are starting from the Cash Book balance to reconcile with the Pass Book balance, we must add Rs. 112 to align the two records.