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

Making a payment on account would result in...

  1. A debit to accounts payable

  2. A credit to accounts payable

  3. A debit to cash

  4. A debit to accounts receivable
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Paying on account reduces a liability. Since liabilities have a normal credit balance, a decrease is recorded as a debit.

Multiple choice

Take home pay is the amount you have left in your paycheck

  1. After you pay your bills for the week

  2. after taxes and deductions

  3. before taxes and deductions

  4. before you pay your bills for the week
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Take home pay, or net pay, is the amount remaining after mandatory taxes and other payroll deductions are subtracted from gross earnings.

Multiple choice commercial studies budgeting meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement statement of changes in financial position

Which of the following transactions will result into flow of cash ?

  1. Cash withdrawn from bank $Rs 71,000$.
  2. Issue of $9\%$ debentures of $Rs 1,00,000$ to the vendors of machinery.
  3. Received from debtors $Rs 74,000$
  4. Redeemed $10\%$ debentures by converting the same into equity shares.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Amount received from debtors $Rs 74,000$ will be received in cash. This is the only transaction that results in flow (inflow) of cash into the business.
Why other options are incorrect? 
1. Deposit of cash into bank and withdrawal of cash from bank are merely the cash management activities of the business. They do not involve any cash flow. 
2. Conversion of debentures into equity shares is a mere change in capital structure of the company. It does not result in cash flow. 
Hence, the correct answer is option (iii). 

Multiple choice commercial studies budgeting meaning, merits and demerits of cash flow statement meaning and objectives of cash flow statement statement of changes in financial position

Cash flows include _______________.

  1. Cash receipts only

  2. Cash payments only

  3. both (A) and (B)

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

Cash flow is the net amount of cash and cash equivalents being transferred into and out of a business. It encompasses both cash receipts (inflows) and cash payments (outflows).

Multiple choice book keeping and accountancy reserve and fund accounting treatment for depreciation meaning and characteristics of provisions provision for depreciation account

Consider the following statement:
1. According to the provisions of FEMA, $1999$, cash in the form of coins and bank notes are included in 'Currency Notes'
2. According to the FEMA's provisions, ATM cards are not included in currency.
3. All 'money orders' can be treated as 'currency'.
Which of the above statement/s is/ are not true?

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

Option B is the correct one.

Currency” includes all currency notes, postal notes, postal orders, money orders, cheques, drafts, traveler's cheques, letters of credit, bills of exchange and promissory notes, credit cards or such other similar instruments, as may be notified by the Reserve Bank.

Currency notes” means and includes cash in the form of coins and banknotes.



Multiple choice book keeping and accountancy accounting procedures - rules of debit and credit meaning, advantages and limitations of journals understand the classification of accounts introduction to books of prime entry

When a cheque received on a particular date is not deposited the same day into 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
When a cheque received is not deposited on the same day, it is taken in the cash account and when it is deposited in bank, then a contra entry is passed. 
For example cheque received from Ram on 15th March is deposited on 18th March, following entries will be passed: 15/3 Cash A/c Dr.

Multiple choice organisation of commerce and management cash book and bank related transactions objectives and importance of bank reconciliation statement meaning of petty cash book bank balance, bank overdraft, meaning, and bank reconciliation statement

A bank reconciliation statement is prepared with the balance of __________ .

  1. cash book

  2. pass book

  3. either (A) or (B)

  4. neither (A) nor (B)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

To reconcile means to find out the differences if any between two or more things and eliminate it. Now, in case of any banking transactions for each deposit or withdrawal the entry is recorded at two places.

  • The pass book maintained by the bank and
  • The cash book maintained by the account holder.

These two books are opposites of each other which means if one shows credit balance then the other would reflect a debit balance of the exact same amount. But due to reasons like timing differences the balances of both these books do not match. 

So, to reconcile the same a bank reconciliation statement is prepared. The aim while preparing a bank reconciliation statement is to take either pass book or cash book  balance as the starting point, to add or deduct certain entries and reach the balance of the other book ie, if cash book balance is the starting point then after reconciling we should reach at pass book balance.

Multiple choice organisation of commerce and management cash book and bank related transactions objectives and importance of bank reconciliation statement meaning of petty cash book bank balance, bank overdraft, meaning, and bank reconciliation statement

While preparing a Bank Reconciliation Statement taking the balance as per Cash Book as the starting point, uncollected cheques are:

  1. Added

  2. Subtracted

  3. Not required to be adjusted

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

When starting with the Cash Book balance, uncollected cheques (cheques sent to the bank but not yet cleared) mean the bank balance is lower than the cash book balance. Therefore, they must be subtracted to reconcile.

Multiple choice organisation of commerce and management cash book and bank related transactions objectives and importance of bank reconciliation statement meaning of petty cash book bank balance, bank overdraft, meaning, and bank reconciliation statement

While preparing a Bank Reconciliation Statement taking the balance as per Cash Book as the starting point unpresented cheque are:

  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

Unpresented cheques are cheques issued by the business but not yet presented for payment at the bank. Since the cash book balance was reduced when the cheque was issued, but the bank balance has not yet been reduced, the cash book balance is lower than the bank balance; thus, it must be added.

Multiple choice organisation of commerce and management cash book and bank related transactions objectives and importance of bank reconciliation statement meaning of petty cash book bank balance, bank overdraft, meaning, and bank reconciliation statement

The amount withdrawn by the accountholder from his current account in excess of the balance standing in that account upto specified limit is known as 'Bank Overdraft'.

  1. True

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

A bank overdraft is a credit facility that allows an account holder to withdraw more money than is available in their current account, up to a pre-approved limit.

Multiple choice organisation of commerce and management cash book and bank related transactions objectives and importance of bank reconciliation statement meaning of petty cash book bank balance, bank overdraft, meaning, and bank reconciliation statement

Bank Reconciliation statement is prepared by: 

  1. Bank

  2. Customer of bank

  3. Creditors of a business

  4. Neither of the three
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A Bank Reconciliation Statement is a document prepared by the account holder (the business) to reconcile their internal records (Cash Book) with the bank's records (Pass Book).

Multiple choice organisation of commerce and management cash book and bank related transactions objectives and importance of bank reconciliation statement meaning of petty cash book bank balance, bank overdraft, meaning, and bank reconciliation statement

Which of the following items is to be 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

When using an Amended Cash Book, all standard timing differences (like bank charges or direct payments) are already adjusted in the cash book. A wrong entry in the Pass Book is an error made by the bank, which must be adjusted in the BRS.