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

Constraints imposed by most funds on check writing are:

  1. account balance should not fall below the minimum capital required

  2. checks issued must be for at least the minimum amount specified

  3. number of checks per month must not exceed a specified number

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

Mutual funds impose two main check writing constraints: the account balance must not fall below the minimum capital required to maintain the account, and checks issued must be for at least the minimum amount specified by the fund. These requirements ensure operational efficiency and maintain account viability.

Multiple choice

‘C’ is employed as cashier by a firm to receive money at its sale counter. It is his duty to make entries in the ledger showing the amounts received by him. He is prosecuted on the charge of criminal breach of trust in respect of rupees ninety thousand on the basis of evidence showing he made an entry showing that he had received rupees ten thousand only whereas he had actually received rupees one lakh. ‘C’ has taken the plea that the wrong entry was accidental and unintentional. The fact that other entries made in the same ledger are false, each showing receipt of less amount by ‘C’ is

  1. relevant as it has a bearing on the question of intention

  2. not relevant as the other entries are not basis of charge

  3. not relevant as the evidence is extraneous

  4. not relevant as other entries are not in issue
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Under Section 14 of the Evidence Act, facts showing the existence of a state of mind or intention are relevant. In criminal breach of trust cases, the defendant's intent is a crucial element. Evidence showing a pattern of false entries (showing receipts less than actually received) is highly relevant to establishing that the specific false entry in question was intentional rather than accidental, as it demonstrates a consistent course of conduct indicating dishonest intent. The systematic nature of multiple false entries makes it difficult to accept that the charged entry was an isolated mistake.

Multiple choice

Which of the following terms is not related to banking?

  1. Dormant

  2. Pay in slip

  3. Overdraft

  4. At-the-Money

  5. Debit card
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

At-the-Money is related to stock market. A situation where an option's strike price is identical to the price of the underlying security. Both call and put options will be simultaneously "at the money." For example, if XYZ stock is trading at 75, then the XYZ 75 call option is at the money and so is the XYZ 75 put option.

Multiple choice

Bank deposits that can be withdrawn without notice are called:

  1. account payee deposits

  2. fixed deposits

  3. variable deposits

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

Demand deposits are bank deposits that can be withdrawn on demand without any prior notice or penalty. These include checking accounts and current accounts where account holders can withdraw funds anytime through checks, ATMs, or electronic transfers. In contrast, fixed deposits (term deposits) lock funds for a specified period, while 'account payee' and 'variable deposits' are not standard banking terminology for withdrawal categories.

Multiple choice

Directions: Choose the best option to complete the conversation.

Cashier at the store: Your total bill is of Rs. 1000. Would you like to pay by cash or by card? Customer: ____

  1. I will pay by credit card.

  2. I’m not carrying anything.

  3. I need to check my account balance.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The statement is whether the customer wants to pay by cash or by card. The answer would be either cash or card.  Option 1 is the correct answer, which says that the customer will pay by card.

Multiple choice

Which of the following is not negotiable instrument?

  1. Bill of exchange

  2. Bearer cheque

  3. Promissory note

  4. Crossed cheque

  5. Both 3 and 4
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Negotiable instrument is an unconditional order to pay a certain sum of money to the payee by the payer at a specified future date, which is transferable. Bill of exchange, bearer cheque, demand draft and promissory note are transferable and unconditional orders. Correct option is 4 (crossed cheque, i.e., account payee cheque).

Multiple choice

Which of the following is/are contra entry transaction(s)?

  1. Cash deposited into bank credited from cash book

  2. Cash received from debtors, but deposited into bank on the next day

  3. Cash withdrawn from bank for office use

  4. Cash withdrawn from bank for personal use

  5. 1, 2 and 3
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

Cash deposited into bank credited from cash book, cash received from debtors, but deposited into bank on the next day and cash withdrawn from bank for office use are contra entry transactions.

Multiple choice

The noting and protesting charges are paid on

  1. acceptance of the bills of exchange

  2. drawing of the bills of exchange

  3. dishonour of the bills of exchange

  4. discounting of the bills of exchange

  5. endorsement of bills in favour of creditors by the drawer
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The noting and protesting charges are paid by the drawer on the dishonour of bills of exchange.

Multiple choice

A bill is drawn on 29th January 2012 for 3 months. There is a public holiday on date of maturity after 3 months including the days of grace. In this case, what should be the due date of maturity of bill?

  1. 3rd May, 2012

  2. 29th April, 2012

  3. 2nd May, 2012

  4. 1st May, 2012

  5. None of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In case of any public holiday on the due date of bill to be matured including 3 days of grace period, the due date of maturity shall be the preceeding date of the normal due date. The normal due date including 3 days of grace is 02 May, 2012 in this case.  Due to public holiday on 02 May, 2012, the final due date of bill to be matured shall be 01 May, 2012.

Multiple choice

The cheque of Rs. 85,000 issued to Ramesh has been dishonored, and has been wrongly credited to purchase return book. What would be rectifying journal entry?

  1. Bank a/c Dr. Rs. 85,000To Ramesh Rs. 85,000

  2. Bank a/c Dr. Rs. 85,000To Purchase Return a/c Rs. 85,000

  3. Purchase Return a/c Dr. Rs. 85,000To Ramesh a/c Rs. 85,000

  4. Purchase return a/c Dr. Rs. 85,000To cheque issued but not Rs. 85,000presented for payment a/c

  5. Ramesh Dr. Rs. 85,000To Purchase Return a/c Rs. 85,000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
The correct entry is The wrong entry is
--- ---
Ramesh a/c   Dr.
Rs. 85,000
           Bank a/c        Dr
Rs. 85,000
To Bank a/c
Rs. 85,000
To   Purchase Return a/c
Rs. 85,000

The rectifying Entry is

| | | | |
Purchase Return a/c
|
Dr. Rs. 85,000
| | | |
To Ramesh
|
Rs. 85,000
|  | |

The correct option is (3).

Multiple choice

A bearer cheque is issued by one Mr. Ashok in favour of Aman, but he forgets to hand over the cheque to Aman. Aman however, picks up the cheque in his absence from his table.

Whether the negotiation has taken place?

  1. No, endorsement is also needed

  2. No, delivery is also needed

  3. No, endorsement and delivery both required

  4. Yes, the cheque is drawn in his favour
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

(2) Delivery of the cheque is foremost requirement. Delivery is also needed