Accounts of Banking Companies MCQ | Multiple Choice Questions and Answers

 Accounts of Banking Companies MCQ
Multiple Choice Questions and Answers
For B.Com, CMA, CS, CA, BBA and MBA

Multiple Choice Questions and Answers

1. Banks prepare the accounts for

a) Calendar year.

b) Financial year.

c) Cooperative year.

d) Diwali year.

2. As per Sec. 17 of the Banking Regulation Act every bank has to transfer of profit to statutory reserve fund account:

a) 10%

b) 15%

c) 20%

d) 25%

3. Banks show the provision for income-tax under the head:

a) Contingency accounts.

b) Contingent liabilities.

c) Other liabilities and provisions.

d) Borrowings.

4) The heading other assets does not include

a) Silver.

b) Interest accrued.

c) Inter-office adjustment (Dr.)

d) Gold.

5. A scheduled bank shall maintain deposit with RBI equal to at least ____ of the time and demand liabilities.

a) 1%

b) 1.5%

c) 2%

d) 3%

6. Present Cash Reserve Ratio (CRR) is :

a) 2%

b) 3%

c) 4%

d) 5%

7. Present Statutory Liquidity Ratio (SLR) is:

a) 12%

b) 15%

c) 18%

d) 30%

8. Rebate on bills discounted is

a) An item of income.

b) A liability.

c) Income received in advance.

d) Income outstanding.

9. A non-banking asset is

a) An item of office equipment.

b) Any asset acquired from the debtors in satisfaction of claim.

c) Money at call and short notice.

d) Furniture and fixtures.

10. A non-performing asset is :

a) Money at call and short notice.

b) An asset that ceases to generate income.

c) Cash balance in nil.

d) Cash balance with RBI.

11. Provision is created for standard assets @:

a) 10%

b) 20%

c) 30%

d) 0.40%

12. Provision is created for sub-standard assets @:

a) 10%

b) 15%

c) 20%

d) 30%

13. Provision created against loose assets and unsecured doubtful debs is:

a) 10%

b) 20%

c) 30%

d)100 %

14. Which one of the following is correct?

a) Provision created for assets doubtful upto one year is 25%.

b) Provision created for assets doubtful above one year and upto three year is 40%.

c) Provision created for assets doubtful for more than 3 years is 100%.

d) All of the above

15. When income is to be recognized on cash basis, a distinction should be made between

a) Performing and non-performing assets.

b) Banking and non-banking assets.

c) Monetary and non-monetary assets.

d) Current and non-current assets.

16. Doubtful asset is one which has remained in the sub-standard category for:

a) 12 months

b) 18 months

c) 24 months

d) 48 months

17. Sub-standard asset is one which has been classified as NPA for a period not exceeding:

a) 1 year

b) 2 years

c) 3 years

d) 4 years

18. Income from standard asset is to be recognised on:

a) Cash Basis

b) Accrual Basis

19. A term loan will be treated as NPA if interest and installment of principal amount remain overdue for a period  more than:

a) 90 days

b) 180 days

c) 270 days

d) 360 days

20. A cash credit amount will be treated as NPA if interest and installment of principal amount remain overdue for a period  more than:

a) 90 days

b) 180 days

c) 270 days

d) 360 days

Fill in the blanks:

1.    A banking company cannot grant loan to any of its directors.

2.    Banking companies are governed by the Banking Regulation Act, 1949.

3.    The maximum number of Partners in a banking business is 10.

4.    Rebate on Bills Discounted for a banking company is not an income.

5.    No banking company shares pay any dividend unless its capital expenses and fictitious assets are written off.

6.    Statutory reserve required = 25%

7.    Cash reserve with RBI = 4% of its time and demand liabilities.

8.    Limit on investments in shares of other companies: 30% of paid up capital and reserves.

9.    Rebate on bills discounted is shown under the head “other liabilities” of the balance sheet as unexpired discounts.

10. Paid up capital of a banking company must be at least one-half of the subscribed capital of a banking company.

11. The accounting year of a banking company ends on 31st march of every year.

12. Provision for bad and doubtful debts cannot be shown as deduction from interest earned in the profit and loss account of banking companies.

13. Bills for collection at the end of the year are not shown in any schedule. They appear at the foot of the balance sheet.

14. Contingent liabilities are shown under schedule 12.

15.  Agricultural advances granted for short duration will be treated sa NPA if the installment and interest thereon remains overdue for two crop seasons.

State whether the following statements are true or false:

1.       Subscribed capital of a banking company should not exceed half of the authorized capital and the paid-up capital should not exceed half of the subscribed capital. [True]

2.       A banking company should transfer 20% of its profits to a statutory reserve, only till such reserve together with share premium account balance equals the paid-up capital. [False]

3.       A banking company cannot pay dividend on its shares until it writes off all capitalized expenses such an preliminary expenses, brokerage and commission on issue of shares, etc. [True]

4.       A banking company cannot grant any loans or advances on the security of its own shares. [True]

5.       The total of bank’s advances comprises loans, cash credits, overdrafts and money at call and short notice. [False]

6.       In a bank’s balance sheet gold is shown under ‘Other assets’ whereas silver is shown under ‘Investments’. [False]

7.       Banks do not make a provision for bad debts, as they secure or insure all their advances. [False]

8.       ‘Rebate on bills discounted’ is a liability and is, therefore, shown under the heading ‘Other liabilities’ by banks. [False]

9.       Agricultural advances granted for long duration will be treated sa NPA if the installment and interest thereon remains overdue for one crop seasons.  [True]

10.   A banking company cannot grant any loan or advances on the security of its own shares.      [True]

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