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

'Surprise Checks' is a part of which of the following?

  1. An auditor's report

  2. An auditor's standard

  3. An auditor's program

  4. An auditor's working papers

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

Audit program includes set of polices and procedures for the implementation of auditing. Surprise check is the part of auditor's programme.

Multiple choice

The outgoing cheque of Rs. 3,000 is recorded twice in the credit side of bank column of Two-Columnar Cash Book. How will you make amendments in the cash book for this error?

  1. Rs. 3,000 is to be entered in the debit side of bank column.

  2. Rs. 3,000 is to be entered in the credit side of bank column.

  3. Rs. 3,000 is to be entered in the debit side of Cash Column.

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

It is correct that Rs. 3,000 is to be entered in the debit side of bank column. The outgoing cheque is recorded two times or twice in the credit side of bank column of Rs. 3,000. Hence, in the credit side of bank column, double of Rs. 3,000, i.e. Rs. 6,000 are entered. Therefore, to rectify this error, Rs. 3,000 will be entered in the debit side of the bank column. The net effect of this will be that Rs. 3,000 will be in the credit side of bank column (Rs. 6,000 in credit side -  Rs. 3,000 in debit side = Rs. 3,000 ).

Multiple choice

The salary of Rs. 10,000 paid by cheque is entered in credit side of Cash Column of Two-Columnar Cash Book. How will you rectify it in the cash book?

  1. Rs. 10,000 is to be entered in the credit side of bank column only.

  2. Rs. 10,000 is to be entered in the credit side of the bank column, and Rs. 10,000 is to be entered in the debit side of cash column.

  3. Rs. 10, 000 is to be entered in the credit side of bank column only.

  4. Rs. 10,000 is to be entered in the credit side of cash column, and Rs.10, 000 is to be entered in the debit side of bank column.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

It is correct. Rs. 10,000 is credited to the bank column because it is not credited earlier. Rs. 10, 000, which was entered by mistake in the credit side of cash column, will be debited to cash column to rectify it.

Multiple choice

A cheque of Rs. 5,000 is issued to our customer Mohit, but Mohit has not presented for payment till the date of preparation of Bank Reconciliation Statement. When the balance as per cash book is given and we have to calculate balance as per pass book, the cheque issued of Rs. 5,000 would be

  1. added in the balance as cash book

  2. subtracted from balance as per cash book

  3. added in the balance as per pass book

  4. subtracted from balance as per pass book
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This is correct. When we had issued the cheque to Mohit, we would have decreased our balance in bank thinking that Mohit would present it for payment. But it is not presented for payment till the date of preparation of Bank Reconciliation Statement and the balance at bank is not decreased. Hence, the balance, which was decreased before is not decreased actually and we have to increase it and by which the balance at bank is increased, is to be added in the balance as per cash book.

Multiple choice

The commission of Rs. 1,000 was charged by bank, but it was entered in debit side of Bank Column of Two-Columnar Cash Book. How will you rectify this mistake in the Two-Columnar Cash Book?

  1. No rectification is required.

  2. Rs. 2,000 is to be entered in credit side of cash column.

  3. Rs. 2,000 is to be entered in the credit side of bank column.

  4. Rs. 1,000 is to be entered in the debit side of bank column.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

It is correct. We have to enter Rs. 1,000 in the credit side of bank column as it decreases the balance in the bank. But we have entered Rs. 1,000 in the debit side of bank column. Hence, double of Rs. 1,000, i.e. Rs. 2,000 will be entered in the credit side of bank column.

Multiple choice

A cheque of Rs. 2,000 received from our customer was dishonoured when it was presented for payment, but it was entered in credit side of Bank Column of Two-Columnar Cash Book. How will it be rectified in the Two-Columnar Cash Book?

  1. No rectification is required.

  2. Rs. 2,000 is to be entered in the debit side of bank column.

  3. Rs. 2,000 is to be entered in the credit side of cash column.

  4. Rs. 2,000 is to be entered in the debit side of cash column.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This is correct that no rectification is required. The cheque received from our customer is dishonoured when presented for payment. Hence, customer's account will be debited while journalising it. Therefore, while entering it in the Bank Column of Cash Book, it will be entered in its credit side as by customer's account. So, no rectification is required.

Multiple choice

A cheque of Rs. 5,000 received from our customer M/s Ram and Sons was recorded twice in the debit side of Bank Column of Two-Columnar Cash Book. How will you rectify it in the cash book?

  1. Rs. 5,000 is to be entered in the credit side of bank column.

  2. Rs. 5,000 is to be entered in the debit side of bank column.

  3. Rs. 5,000 is to be entered in the credit side of cash column.

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

This is correct. Rs. 5,000 is to be entered in the credit side of bank column. Since we have entered two times or twice the cheque received from our customer M/s Ram and Sons, then we have entered Rs. 10,000 ( 2 x 5,000 (double of 5000)) in the debit side of bank column. Hence, Rs. 5,000 would be entered in the credit side of bank column to nullify the mistake made.

Multiple choice

A cheque of Rs. 10,000 is sent to bank, but not yet credited till the date of preparation of Bank Reconciliation Statement. When the balance as per pass book is given, and we have to calculate the balance as per cash book, Rs. 10,000 would be

  1. added in the balance as per pass book

  2. subtracted from balance as per pass book

  3. added in the balance as per cash book

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

This is correct. When the cheque of Rs. 10,000 is sent to bank, the customer increases the balance in his books. But if it is not credited till the date of preparation of Bank Reconciliation, the customer has to decrease the balance by Rs 10,000. That by which the bank balance of the customer is decreased, is to be added in the balance as per pass book.

Multiple choice

Rs. 6,000 is deposited in bank by Ram from his cash in business, but is entered only in the debit side of bank column. How will the amendments made in the Two - Columnar Cash Book to rectify the mistake?

  1. Rs. 6,000 is entered in the credit side of cash column only.

  2. Rs. 6,000 is entered in the credit side of cash column, and Rs. 6,000 is entered in the debit side of bank column.

  3. Rs. 6,000 is entered in the credit side of bank column and Rs. 6,000 is entered in the debit side of cash column.

  4. Rs. 6,000 is entered in the debit side of bank column only.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This is correct. It is a contra transaction. As the balance at bank would increase when cash is deposited, it would be entered in debit side of bank column and credit side of cash book but the credit has not been given earlier.

Multiple choice

Rakesh has made the payment to its creditor of Rs. 1,450 through cheque, but credited it as Rs. 1,540 in the bank column of his Two - Columnar Cash Book. How will Rakesh make amendments in his Two - Columnar Cash Book?

  1. Rs. 90 is entered in the debit side of bank column.

  2. Rs. 90 is entered in the credit side of bank column.

  3. Rs.1,450 is entered in the debit side of bank column.

  4. Rs. 90 is entered in the debit side of cash column.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This is correct. As the payment of only Rs. 1,450 is made through cheque by Rakesh, the bank balance should be decreased by Rs. 1,450 but Rakesh has entered Rs. 1,540 in the credit side of bank column. Therefore, Rs. 90 is entered in excess in the credit side (Rs. 1,540 Rs. 1,450). So, Rs. 90 would be entered in the debit side to rectify the mistake made or make amendments.

Multiple choice

The cash column of the Two - Columnar Cash Book has been overcast by Rs. 2,100 from the receipts side. How to make amendments in the Two - Columnar Cash Book to rectify this mistake?

  1. Rs. 2,100 is entered in the credit side of cash column.

  2. Rs. 2,100 to be entered in the debit side of Cash Column

  3. Rs 2,100 to be entered in the credit side of Bank Column

  4. Rs 2,100 to be entered in the debit side of Bank Column
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This is correct. The receipts side is the debit side of cash column or bank column. Hence, if the cash column is overcast by Rs. 2,100 it means that Rs. 2,100 is shown in excess in the debit side. Therefore, Rs. 2,100 is to be entered in the credit side of cash column to nullify the mistake made.

Multiple choice

The furniture is purchased for personal use of Rs. 2,000 and the payment is made through cheque. It is entered in the credit side of bank column. How to rectify this error made in the Two - Columnar Cash Book?

  1. Rs. 2,000 is entered in the debit side of bank column.

  2. No rectification is required.

  3. Rs. 2,000 is entered in the credit side of cash column.

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

This is correct that no rectification is required.

The payment of furniture is made through cheque and hence the bank balance is decreased by Rs. 2,000. That by which the balance is decreased is entered in credit side of bank column. Hence, no rectification is required. It is immaterial that the furniture is purchased for personal or business use.

Multiple choice

Cheque of Rs. 20,000 was issued to our customer, but only Rs. 2,000 is entered in the Two - Columnar Cash Book. How to rectify this mistake in the Two - Columnar Cash Book, assuming that the entry is made in the correct side of the Cash Book?

  1. Rs. 18,000 is entered in the credit side of bank column.

  2. Rs. 20,000 is entered in the credit side of bank column.

  3. Rs. 18,000 is to be entered in the debit side of bank column.

  4. Rs. 18,000 is entered in the credit side of cash column.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This is correct. The cheque of Rs. 20,000 is issued and hence our bank balance would be decreased by Rs. 20,000. So, we have to enter Rs. 20,000 in the credit side of bank column, but only Rs. 2,000 is entered in credit side of the bank column. Further Rs. 18,000 is to be entered in the credit side of bank column (Rs. 20,000 - Rs. 2,000).

Multiple choice

The receipts side of the cash book (bank column) has been undercast by Rs. 4,100. How to make amendments in the Cash Book to rectify this mistake?

  1. Rs. 4,100 is entered in the debit side of cash column.

  2. Rs. 4,100 is entered in the credit side of bank column.

  3. Rs. 4,100 is entered in the debit side of bank column.

  4. Rs. 4,100 is entered in the credit side of cash column.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

This is correct. We have undercast the debit side of bank column by Rs. 4,100 as receipts side is the debit side. Rs. 4,100 is entered less in the debit side of bank column. Therefore, Rs. 4,100 is entered in the debit side of bank column to rectify the mistake made.

Multiple choice

The interest of Rs. 500 is charged by bank, but is entered in the credit side of cash column. How to rectify this error in the Two - Columnar Cash Book?

  1. Rs. 500 is to be entered in debit side of cash column only.

  2. Rs. 500 is to be entered in the debit side of cash column and Rs. 500 is to be entered in the credit side of bank column.

  3. Rs. 500 is to be entered in the credit side of bank column only.

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

This is correct.

Interest of Rs. 500 is to be entered in the credit side of bank column. But it is entered in the credit side of cash column. Hence, Rs. 500 is to be entered in its debit side to nullify it. Rs. 500, which is not entered in the credit side of bank column before would be entered in its credit side now.