Chapter 9: Operational Aspects of Accounting Entries (JAIIB – Paper 3)
1. In banks, most accounting entries are passed through which system?
A. Manual Ledger Posting
B. Voucher-based System
C. Double-entry Bookkeeping in a Computerized System
D. Off-balance Sheet Recording
Banks follow double-entry bookkeeping, but accounting is largely automated through Core Banking Solutions (CBS).
2. Why are “contra entries” frequently passed in banks?
A. To record customer deposits
B. To record transactions affecting both cash and bank simultaneously
C. To adjust accrued expenses
D. To transfer profits to reserves
Contra entries are used when cash and bank are affected simultaneously, e.g., cash deposited into the bank.
3. Which feature makes the accounting system in banks different from ordinary business firms?
A. Use of single-entry system
B. Limited accounting standards applicability
C. Separate accounting for each branch not required
D. Large volume of transactions recorded centrally through CBS
The peculiarity is the very high volume of transactions, processed centrally through Core Banking Solutions (CBS).
4. In banks, inter-branch transactions are usually adjusted through:
A. Inter-branch accounts
B. Suspense accounts
C. Contingent accounts
D. Provision accounts
Inter-branch transactions are adjusted through inter-branch accounts to ensure consolidation at the Head Office level.
5. A cheque deposited by a customer is recorded in bank books as:
A. Debit Customer Account, Credit Suspense Account
B. Debit Cash Account, Credit Interest Income
C. Debit Customer Account, Credit Inter-branch Clearing Account
D. Debit Income Account, Credit Customer Account
Cheques are first routed through clearing accounts (inter-branch or clearing house), with customer account debited and bank’s clearing account credited.
6. Which accounting system is predominantly used by banks in India?
A. Single-entry system
B. Double-entry system with CBS integration
C. Hybrid system of cash and accrual
D. Manual ledger-based system
Banks in India follow double-entry bookkeeping, integrated with Core Banking Solutions (CBS) for automated postings.
7. In foreign banks operating in India, accounting practices must comply with:
A. Only their home country’s regulations
B. Only IFRS standards
C. Basel norms alone
D. Indian Accounting Standards and RBI guidelines
Even foreign banks must comply with Indian Accounting Standards and RBI directives for operations in India.
8. In cooperative banks, accounting is usually more challenging because:
A. They often lack fully integrated CBS systems
B. They follow single-entry bookkeeping
C. RBI does not regulate them
D. They are exempted from auditing
Cooperative banks may still rely on partial automation or semi-manual systems, making reconciliations and compliance more difficult.
9. Which of the following is a unique feature of Regional Rural Banks’ (RRBs) accounting system?
A. They follow single-entry system
B. They are regulated only by NABARD
C. They follow double-entry system but need to comply with both RBI and sponsor bank guidelines
D. They prepare accounts only at HO level
RRBs follow double-entry accounting, but their accounting policies are influenced by both RBI and the respective sponsor bank.
10. Why do Scheduled Commercial Banks in India have more standardized accounting compared to cooperative banks?
A. They are exempted from branch-level reporting
B. They use a cash-based accounting system
C. They follow only international standards
D. They operate under CBS with strict RBI-prescribed formats
Commercial banks follow CBS-based accounting and prepare financial statements strictly as per RBI and ICAI standards.
11. A bank sanctions a term loan of ₹5,00,000 and disburses it directly to the supplier of machinery. The correct accounting entry is:
A. Debit Term Loan A/c ₹5,00,000; Credit Supplier A/c ₹5,00,000
B. Debit Supplier A/c ₹5,00,000; Credit Customer A/c ₹5,00,000
C. Debit Cash A/c ₹5,00,000; Credit Term Loan A/c ₹5,00,000
D. Debit Interest Receivable A/c; Credit Term Loan A/c
When the bank disburses loan directly to the supplier, Term Loan A/c (asset) is debited, and Supplier A/c is credited.
12. A borrower has a cash credit limit of ₹10,00,000. He withdraws ₹2,50,000. What will be the journal entry?
A. Debit Borrower’s Current A/c; Credit Cash A/c
B. Debit Interest A/c; Credit Borrower’s A/c
C. Debit Cash A/c; Credit Borrower’s Current A/c
D. Debit Cash A/c ₹2,50,000; Credit Cash Credit A/c ₹2,50,000
Cash withdrawn against CC is recorded by debiting Cash A/c and crediting the CC Account (liability for the customer).
13. A bill of exchange worth ₹1,00,000 is discounted by the bank at 12% p.a. for 3 months. What is the discount amount?
A. ₹1,200
B. ₹2,000
C. ₹3,000
D. ₹4,000
Discount = (100000 × 12% × 3/12) = ₹3,000.
14. What will be the journal entry for discounting the above bill of ₹1,00,000?
