Accounts of Banking Companies MCQs 2023 [Multiple Choice Questions and Answers]

Accounts of Banking Companies MCQs 2023

Multiple Choice Questions and Answers

For B. Com, CMA, CS, CA, BBA and MBA

Accounts of Banking Companies MCQs

In this Post You will Get Accounts of Banking Companies MCQs which is useful for BCOM CBCS Pattern, BBA, MBA, MCOM and other Competitive and Career Oriented Exams for Commerce stream students.

Introduction to Banking Companies

As per Section 5(b) of the Banking Regulation Act, 1949, "banking" means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise.

As per Section 5(d) of the Banking Regulation Act, 1949, "company" means any company as defined in Section 3 of the Companies Act, 1956 and includes a foreign company within the meaning of Section 591 of that Act.

As per Section 5(c) of the Banking Regulation Act, 1949 a "Banking Company" means any company which transacts the business of banking in India.

Accounts of Banking Companies MCQs 2023

1. Banks prepare the accounts for

a) Calendar year.

b) Financial year.

c) Cooperative year.

d) Diwali year.

Ans: b) Financial 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%

Ans: 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.

Ans: c) Other liabilities and provisions.

4) The heading other assets does not include

a) Silver.

b) Interest accrued.

c) Inter-office adjustment (Dr.)

d) Gold.

Ans: 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%

Ans: d) 3%

6. Present Cash Reserve Ratio (CRR) is:

a) 2%

b) 3%

c) 4.5%

d) 5%

Ans: c) 4.5% [May 21, 2023]

Also Read: Multiple Choice Questions and Answers

- Advanced Financial Accounting MCQs 2023

- Accounts of Banking Companies MCQs

- Accounts of Life Insurance Companies MCQs

- Accounts of General Insurance Companies MCQs

- MCQ on Investment Accounting

- Advanced Financial MCQs (Dibrugarh University 2013 to 2023)

7. Present Statutory Liquidity Ratio (SLR) is:

a) 12%

b) 15%

c) 18%

d) 30%

Ans: c) 18% [May 24, 2023]

8. Rebate on bills discounted is

a) An item of income.

b) A liability.

c) Income received in advance.

d) Income outstanding.

Ans: c) Income received in advance.

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.

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

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.

Ans: b) An asset that ceases to generate income.

11. Provision is created for standard assets @:

a) 10%

b) 20%

c) 30%

d) 0.40%

Ans: d) 0.40%

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

a) 10%

b) 15%

c) 20%

d) 30%

Ans: b) 15%

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

a) 10%

b) 20%

c) 30%

d)100 %

Ans: 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

Ans: 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.

Ans: a) Performing and non-performing 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

Ans: a) 12 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

Ans: a) 1 year

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

a) Cash Basis

b) Accrual Basis

Ans: 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

Ans: a) 90 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

Ans: a) 90 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 as NPA if the installment and interest thereon remains overdue for two crop seasons.

16. Schedule-1 of banking companies deals with Capital.

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 a preliminary expense, 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 as 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]

11. Substandard, doubtful and loss assets are types of non-performing assets. [True]

12. The accounts of banking companies is required to be audited by a chartered accountant.        [True]

FAQs

1. What is a Banking Company?

Ans: As per Section 5(c) of the Banking Regulation Act, 1949 a "Banking Company" means any company which transacts the business of banking in India.

2. How many statutory reserves are required?

Ans: As per Sec. 17 of the Banking Regulation Act every bank has to transfer of profit to statutory reserve fund account @ 25% of the profit earned during the current year.

3. What is NPA?

Ans: NPA indicates Non-Performing asset, it means assets of a bank which ceases to generate income for the bank.

4. What are various categoreis of NPA?

Ans: Banks are required to classify non-performing assets further into the following three categories - Sub-standard assets, Doubtful assets and loss assets.

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