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

Which of the following statements is/are correct with respect to debit cards?

  1. The customer need not carry his chequebook and wait until approval.
  2. The customer presents his debit card to the seller and signs 'Sale Slip'.
  3. The amount of purchase is debited to the account of the customer.

  1. 1 only

  2. 2 only

  3. Both 1 and 2

  4. All 1, 2 and 3

  5. 3 only
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

All three statements are correct about debit cards. Debit cards eliminate the need to carry chequebooks and provide instant approval (statement 1). Customers sign a sale slip when making purchases (statement 2). Purchase amounts are immediately debited from the customer's account (statement 3). This is how debit card transactions work.

Multiple choice

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 cheque of Rs. 800 paid into the 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

Cash book overdraft = Rs. 3,000 Cheques issued but not presented for payment=  (- ) Rs. 550 (200+150+250) The cheque paid into the account had not been cleared- (+) Rs. 800 The balance as per the cash book= Rs. 3,250   

Multiple choice

While preparing a Bank Reconciliation Statement taking the balance as per Cash Book as the starting point. An under cast of withdrawal column in pass book is

  1. added

  2. subtracted

  3. not required to be adjusted

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

 An under cast of withdrawal column in pass book means the withdrawal side of the pass book is recorded short, therefore to match the Cash Book with the Pass book, we will add the same amount to Cash book.

Multiple choice

Which of the following items is to appear in the Bank Reconciliation Statement if the balance as per Amended Cash Book is taken as the starting point?

  1. Bank charges and interest charged by bank

  2. Interest allowed and direct payments by bank

  3. Direct payment by our debtors into the bank

  4. A wrong entry in the pass book
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

 If the balance as per Amended Cash Book is taken as the starting point, the wrong entry passed in the Pass book will effect the totals. 

Multiple choice

Direct payment to the third party on behalf of the account holder is initially posted 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. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

 Direct payment to the third party on behalf of the account holder needs to be posted in the Cash Book after the entry has been posted in the pass book. 

Multiple choice

Under BRS, while adjusting the cash book

  1. all the errors and omissions in the cash book are taken into consideration

  2. all the errors and omissions in the pass book are taken into consideration

  3. delay in recording in the pass book due to difference in timing are taken into consideration

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

 While adjusting the cash book, all the errors and omissions in the cash book only are taken into consideration.

Multiple choice

What is amended cash book in the context of BRS?

  1. Rectified cash book having two columns.

  2. Rectification of cash book before preparation of BRS.

  3. Rectification of cash book after preparation of BRS.

  4. Rectified cash book having three columns.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

 Amended cash book is A financial journal that contains all cash receipts and payments, including bank deposits and withdrawals, and it is rectified before the preparation of BRS. 

Multiple choice

The balance shown by bank column of cash book was Rs. 48, 000 on 31.1.98. A cheque issued worth Rs. 24, 000 on 16.1.98, was not cleared till 31.1.98. Cheque worth Rs. 10, 000 received on 20th January, and deposited on 21.1.98, was cleared on 27.1.98. The balance as per pass book as on 31.1.98 (assuming opening balance of pass book and cash book are equal) is

  1. Rs. 14, 000

  2. Rs. 24, 000

  3. Rs. 72, 000

  4. Rs. 82, 000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

 Balance as per cash Book-  Rs. 48, 000

A cheque issued worth but not cleared     (+) Rs. 24, 000 ( when it was issued the amount got subtracted from cash book but as the information provided in the question, it has not been cleared that means has not been subtracted from Pass book so it will be added again in the cash book also. )

Cheque worth Rs. 10, 000 received on 20th January, and deposited on 21.1.98, was cleared on 27.1.98  -  NO EFFECT  (for this entry both the Pass book and Cash book stands same.) 

So, 48,000 + 24,000= Rs.  72,000

Multiple choice

Which is not Contra entry in three column cash book?

  1. Cash deposited into bank

  2. Cash withdrawn from the bank

  3. Cash withdrawn from the bank for personal use

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

Contra entries in a three-column cash book are transactions that involve both cash and bank accounts, recorded on both sides. Cash withdrawn for personal use is NOT a contra entry because it's only recorded on the payment side (bank column) and doesn't have a corresponding cash receipt.

Multiple choice

Salaries due for the month of March will appear

  1. on the receipt side of the cash book

  2. on the payment side of the cash book

  3. as a contra entry

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

Outstanding salaries (salaries due but not paid) are an accrued expense. They are recorded through a journal entry and appear in the ledger, NOT in the cash book. The cash book only records actual cash transactions.

Multiple choice

When a cheque received on a particular date is not deposited the same day in the bank, it is entered in

  1. cash column on the debit side

  2. bank column on the debit side

  3. cash column on the credit side

  4. cash column on the debit side and credit side
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A cheque received but not deposited the same day represents cash in hand. In a triple column cash book, such cheques are initially recorded in the cash column on the debit side because the business holds them physically until bank deposit. The bank column entry is made only when the cheque is actually deposited into the bank account.

Multiple choice

A dishonour of a bill receivable (retained) is recorded in

  1. bills receivable book

  2. journal proper

  3. three column cash book

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

When a bill receivable that was retained (not discounted with the bank) is dishonoured, there is no specialized book to record this event. The dishonour requires reversing the original bill entry and recording the debt recovery process, which is done in the journal proper (general journal). The bills receivable book only records initial bill creation, not subsequent dishonours.