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

Which of the following technique is used to ascertain the correctness of debtors balance in books?

  1. Observation

  2. Enquiry

  3. Computation

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

Confirmation is a technique to obtain audit evidences.
External confirmation - obtaining a written confirmation directly from a third party, such as bank or debtor.

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 which of the book cash purchase is recorded?

  1. Cash book

  2. Purchase book

  3. Both (a) and (b)

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

All cash transactions, including cash purchases of goods, must be recorded in the cash book. The purchase book is a specialized subsidiary book used solely to record credit purchases of goods. Therefore, cash purchases are never entered in the purchase 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

Unfavourable balance as per cash book means which of the following?

  1. Cr. balance in cash book

  2. Dr. balance in cash book

  3. Bank overdraft

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

An unfavorable balance in the cash book refers to a situation where the bank column has a credit balance, meaning the business has withdrawn more money than it has deposited. This state of having a negative bank balance is commonly known as a bank overdraft.

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

Small payments are recorded in a book called _____________.

  1. Cash book

  2. Small payments book

  3. Purchase book

  4. Petty cash book
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A petty cash book is a subsidiary book used to record small, routine, and low-value expenses such as postage, stationery, cartage, and taxi fares. Recording these minor payments in a separate book prevents the main cash book from becoming cluttered and overloaded with small entries.

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 primary book wherein the money received from head cashier and the amount of expenditure for a particular period of an organization are recorded in chronological order of dates in separate money columns of both sides, is called ______________  cash book.

  1. Analytical Petty cash book

  2. Columnar petty cash book

  3. Imprest petty cash book

  4. Single column cash book
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A columnar petty cash book is designed with separate columns on both sides to record receipts from the head cashier and various categories of small expenditures in chronological order. This layout allows for easy classification and analysis of different expense heads at the end of the period.

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 three column cash book, when does contra entry arises?

  1. Withdrawl of cash from bank

  2. Payment to Creditors.

  3. Withdrawl of cash from bank for personal use

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

A contra entry occurs when a transaction affects both cash and bank accounts within the same cash book. Withdrawing cash from the bank for office use involves debiting the cash column and crediting the bank column, making it a contra entry. Withdrawing cash for personal use, however, is treated as drawings and is not a contra 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 among the following are advantages of Imprest Petty Cash Book ? 

  1. Labor Minimization

  2. Determination of expenses

  3. Control over petty expenses

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

The imprest system of petty cash offers several key benefits, including reducing the workload of the head cashier (labor minimization), simplifying the tracking and determination of minor expenses, and establishing strict control over petty cash spending. Therefore, all of the listed options are genuine advantages.

Multiple choice

The man went to the bank to ______ his money into US dollars.

  1. erode

  2. adjustment

  3. adapt

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

The verb "convert" means to change something from one form or system to another, which is the standard term for exchanging currency. "Erode" and "adapt" do not apply to currency exchange, and "adjustment" is a noun.

Multiple choice

When cash is paid for rent, the amount is recorded in the

  1. Cash Credit column and General Debit column.

  2. Sales Credit column and General Debit column.

  3. General Credit column and Cash Debit column

  4. General Credit column and Sales Credit column
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Paying rent is an expense. Recording this transaction involves debiting the Rent Expense account (General Debit) and crediting the Cash account (Cash Credit).

Multiple choice

When cash is paid for supplies,

  1. Supplies is increased

  2. Supplies is credited

  3. the balance of Supplies is decreased

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

When supplies are purchased, the Supplies asset account increases. The transaction is recorded by debiting Supplies and crediting Cash.