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

A cheque is considered as stale when if has been in circulation for _______________.

  1. more than forty eight hours

  2. more than one year

  3. more than six months unless otherwise specified

  4. more than three months
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Under current banking regulations (such as those in India since April 2012), a cheque is considered stale and is no longer honored by the bank if it has been in circulation for more than three months.

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 subsidiary book in which details of cash received in the form of currency, cheques, drafts, etc. and details of payment made in cash or by cheques, and drafts is called cash book.

  1. True

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

This statement is true because the Cash Book is specifically designed as a subsidiary book to record all transactions relating to cash receipts and payments, whether in currency, cheques, or drafts.

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

________is the book in which cash discount received and allowed is recorded.

  1. Sales book

  2. Purchase book

  3. Petty cash book

  4. Journal proper
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A book maintained to record transactions, which do not find place in special journals, is known as Journal Proper or Journal Residual. When the journal is sub-divided into various subsidiary books, such as, Sales Book, Purchase Book, etc. The Journal becomes the residuary book in which only those transactions are recorded that cannot be recorded in any other subsidiary book. This type of journal is called journal proper. The following types of entries are recorded in Journal Proper:

a. Opening entry
b. Closing entry
c. Transfer entries
d. Rectification entries
e. Adjustment entries
f. Miscellaneous entries such as discount received, bad debts written off, etc.
Thus, cash discount received and allowed 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

Book in which small payments are recorded is ____________.

  1. Petty cash book

  2. Double column cash book

  3. Journal proper

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

The petty cash book is defined as relatively small amount of cash kept at hand  for making quick payments for miscellaneous small expenses in the business concern. A cash book which is created for the small payments of an organisation i.e. taxi fare, car fare, bus fare, postage and stamps etc. has a separate fund to meet the day to petty expenses in the office is called as petty cash book. It is established in the responsibility o petty cashier who maintains a separate cash book to record, such small payments only. It's a cash book to enter daily expenses like cost of stationary, postage and so on. The petty cash book will be maintained by separate cashier known as petty cashier in the accounting field. 

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 is a book of original entry.

  1. True

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

Cash book is  a primary book of original entry and includes all cash transactions of the enterprise in a chronological  order. 

A cash book is a book of original entry because it is  the subsidiary book that records all the cash transactions of the business from the source document. 

Hence, cash transactions of a business are first recorded in the cash book, and thus, it is termed as a book of original 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

In fixed deposit A/c money once deposited can be withdrawn at any time.

  1. True

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

In a Fixed Deposit account, the money is locked in for a specified period. It cannot be freely withdrawn at any time without premature withdrawal penalties or formal closure procedures.

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

_________ is/are forms 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 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. This is a very popular book and is maintained by all the organisation, big or small, profit or not-for-profit. It serves the purpose of both journal as well as ledger account. 
It is also called the book of original entry. 
Single column cash book, Double column cash book and Three column cash book are all forms of a cash 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

The opening balance on the debit side of the bank column in Cash Book indicates ___________.

  1. The total amount withdrawn from the bank

  2. The total amount deposited in the bank

  3. Cash at bank

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

Since the bank account is an asset, a debit balance represents a positive, favorable balance. Therefore, an opening debit balance in the bank column indicates cash available at the bank.

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.