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 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

Direct payment to third party by the bank on behalf of the account holder is entered in ___________.

  1. the cash book when the amount is paid by the bank

  2. the cash book when the entry is posted in the pass book

  3. the pass book when the amount is paid by the bank

  4. both (b) and (c)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When the bank makes a direct payment, it records the transaction immediately in the Pass Book. The account holder only records it in the Cash Book later, once they receive the bank statement (Pass Book) and see the 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

Which of the following will not be considered while preparing an amended cash book?

  1. Cheques issued but not presented for payment

  2. Cheques deposited but not credited by bank

  3. Any wrong entry in the pass book

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

An amended cash book is adjusted only for correct transactions that were omitted or recorded incorrectly in the cash book. Timing differences (like unpresented or uncleared cheques) and bank errors are not adjusted in the cash book; they are only reconciled in the Bank Reconciliation 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

A debit balance in the depositors Cash Book will be shown as _________.

  1. a debit balance on the Bank Statement

  2. a credit balance on the Bank Statement

  3. an overdrawn balance on the Bank Statement

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

A debit balance in the depositor's cash book represents an asset (cash at bank). In the bank's books, this same amount represents a liability to the depositor, which is shown as a credit balance on the 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 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

There are three common versions of the cash book: single column, double column, and triple column.The single column cash book shows only receipts and payments of cash. The double column cash book shows cash receipts and payments as well as details about bank 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

Payment done by the account holder through issuing a cheque is entered in _____________.

  1. the cash book at the time of issuing the cheque

  2. the cash book at the time of presenting the cheque to the bank for payment

  3. the pass book at the time of presenting the cheque to the bank for payment

  4. both (a) and (c)

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

When a cheque is issued, the account holder immediately records the payment in their cash book. The bank, however, only records this transaction in the pass book when the cheque is actually presented to the bank for payment.

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 correct?

  1. Cash book is a journal and not a ledger

  2. Cash book is a ledger and not a journal

  3. Cash book is both a journal and a ledger

  4. Cash book is neither a journal nor a ledger
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The cash book acts as both a journal and a ledger. It is a journal because transactions are recorded chronologically for the first time, and it is a ledger because it serves as the cash and bank accounts, eliminating the need for separate accounts in the ledger.

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 cheque received and deposited in the bank on the same day is recorded in the ______________.

  1. cash column of the cash book

  2. bank column of the cash book

  3. credited in the cash book

  4. debited in the cash book.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A cheque received and deposited in the bank on the same day directly increases the bank balance, so it is recorded in the bank column of the cash book on the debit side.

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 advantages of imprest system of petty cash include:
1. The main (or head) cashier is relieved of maintaining record of petty payments
2. Small payments are not stuffed in the main cash book.
3. Complete and reliable check is maintained on small items of expenses
4. It is automatically balanced.

  1. $1, 2$ and $4$
  2. $1, 2$ and $3$
  3. $2, 3$ and $4$
  4. $2$ and $4$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The imprest system of petty cash relieves the head cashier from recording minor expenses, keeps the main cash book uncluttered, and provides a reliable control mechanism over small expenses. It is not 'automatically balanced' in a way that is considered a primary advantage of the system.

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

While posting the Cash Payment from Cash Book___________.

  1. only the individual accounts are posted

  2. the individual accounts are debited and also the total of the cash column is credited

  3. only the individual accounts are debited and there is no need to post the total of cash column

  4. the individual accounts are credited and the total of the cash column is debited
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When posting cash payments from the cash book, individual accounts of the recipients are debited. Since the cash book itself serves as the cash account, there is no need to post the total of the cash column to any ledger cash 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

State whether True or False:
All transactions related to bank are recorded in the bank  column of the cash book and these transactions are also recorded in the pass book by the bank.

  1. True

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

This statement is true. Bank transactions are recorded on the depositor's side in the bank column of the cash book, and on the bank's side in the customer's ledger account, which is reflected in 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

Bank column of the Cash Book has __________ balance.

  1. Debit

  2. Credit

  3. Either (a) or (b)

  4. Neither (a) nor (b)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The double column cash book (also known as two column cash book) has two money columns on both debit and credit sides – one to record cash transactions and one to record bank 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/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 is a book of original entry (journal) and also serves as the cash account (ledger). Option B is incorrect because receipts are debited and payments are credited. Option C is incorrect because it 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

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 is an outstanding expense and does not involve any actual cash inflow or outflow. Therefore, it is not recorded in the cash book; it is recorded in the journal proper.

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, including single-column (cash only), double-column (cash and discount, or cash and bank), and three-column (cash, bank, and discount) formats.

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 statements is/are true?
(i) Cash book records all cash receipts and cash payments.
(ii) Cash book records all sale and purchase transactions of goods both in cash and on credit.
(iii) Cash book records discount on cash payments
Select the correct answer from the options given below :-

  1. Only (i) of the above

  2. Only (ii) of the above

  3. Only (iii) of the above

  4. Both (i) and (iii) of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Statement (i) is true because the cash book records cash receipts and payments. Statement (ii) is false because credit transactions are not recorded in the cash book. Statement (iii) is true because cash discounts allowed or received during cash transactions are recorded in the discount columns of a multi-column cash book.