JAIIB Exam 2025 – AFM Important Questions MCQs Quiz-17

29/03/2025

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JAIIB Exam 2025 AFM Important Questions MCQs Quiz-17

JAIIB Exam Quiz 2025: The JAIIB exam is scheduled for 2025 by IIBF. Here, we are providing JAIIB AFM MCQ-based quizzes on a regular basis. You can attempt the quizzes regularly to prepare for the upcoming JAIIB exam. The quizzes will be provided module-wise and unit-wise. You can attempt the JAIIB AFM quizzes from the links below and improve your preparation by practicing regularly. These quizzes will help you boost your score in the JAIIB exam and guide you to clear the exam on your first attempt.

Q.1 According to Section 5(b) of the Banking Regulation Act, which of the following best describes the essential characteristics of banking?
A) Accepting deposits exclusively for safe-keeping, without the intention of utilizing them for lending or investment purposes.
B) Accepting deposits from the public, primarily for the purpose of lending or investment, with such deposits being repayable on demand or otherwise, through instruments like cheque, draft, or order.
C) Mobilizing savings and offering only advisory financial services to customers without dealing in deposit acceptance or credit creation.
D) Facilitating foreign exchange transactions and trade finance, without engaging in accepting deposits from the public.

Q.2 Which of the following statements correctly distinguishes the financial reporting framework applicable to banking companies under Indian law?
A) Banking companies follow only the Schedule III format of the Companies Act, 2013 for preparing financial statements, with no separate format specified under the Banking Regulation Act.
B) Banking companies are exempt from preparing Profit & Loss Accounts under the Companies Act, 2013 and follow RBI’s internal circulars exclusively.
C) While being governed by the Companies Act, 2013, banking companies must prepare financial statements as per the Third Schedule of the Banking Regulation Act, 1949, along with complying with RBI’s guidelines.
D) Banking companies prepare financial statements solely under International Financial Reporting Standards (IFRS) as mandated by RBI, without reference to domestic legislation.

Q 3 As per Section 29 of the Banking Regulation Act, 1949, who is authorized to sign the financial statements of a banking company incorporated in India when there are only two directors on the board?
A) Only the manager or principal officer of the bank.
B) Both directors and the manager or principal officer of the bank.
C) Any one director and the auditor of the bank.
D) The Reserve Bank of India must countersign the statements in this case.

Q.4 According to Section 30 of the Banking Regulation Act, 1949, which of the following statements is correct regarding the appointment of auditors in a banking company?
A) A banking company can appoint an auditor at its discretion, subject only to shareholder approval, without the involvement of RBI.
B) Only chartered accountants who are empaneled with SEBI can be appointed as statutory auditors for a banking company, without any requirement of RBI’s consent.
C) A banking company must appoint an auditor who is qualified under applicable law, but the appointment, reappointment, or removal is subject to the prior approval of the Reserve Bank of India.
D) Auditors for banking companies are directly appointed by the Reserve Bank of India, and the board of directors has no role in the process

Q.5 Which of the following correctly reflects the compliance obligations of a banking company under Sections 31 and 32 of the Banking Regulation Act, 1949?
A) A banking company must submit two copies of its financial statements and auditor’s report to the RBI and ROC within four months of the financial year-end.
B) A banking company is required to submit three copies of its financial statements and auditor’s report to the RBI within three months, which can be extended by RBI by another three months, and simultaneously furnish them to the Registrar of Companies.
C) Only nationalised banks and State Bank of India are required to submit accounts to the Registrar of Companies as per Section 32.
D) Banking companies must file financial statements exclusively with RBI; filing with the Registrar of Companies is optional under the Banking Regulation Act

Q.6 In accordance with Rule 15 of the Banking Regulation (Companies) Rules, 1949, what is the mandatory requirement for the publication of a banking company’s audited accounts?
A) The accounts and auditor’s report must be published in a government gazette within three months from the financial year-end.
B) The accounts and auditor’s report must be filed with the Registrar of Newspapers of India within six months from the date of audit completion.
C) The accounts and auditor’s report must be published in a newspaper circulating where the banking company’s principal office is located, within six months from the end of the financial period.
D) The accounts and auditor’s report need only be published on the banking company’s official website within one year from the financial year-end

Q.7 Which of the following best distinguishes the accounting system of banks from that of most other large enterprises?
A) Banks prioritize real-time updating of ledger accounts, especially customer accounts, over books of prime entry such as cash books, due to the critical nature of transactional accuracy.
B) Banks use a cash basis of accounting instead of the mercantile system, to ensure immediate recognition of cash movements.
C) Unlike other enterprises, banks completely avoid maintaining ledgers and rely solely on journals and cash books for financial reporting.
D) Banks delay the updating of customer ledgers until the end of each month, in line with standard accounting practices used by non-financial enterprises

Q.8 According to Section 2(3) of the Bankers’ Books Evidence Act, which of the following is NOT typically included under the term “Bankers’ Books”?
A) Ledgers
B) Day book
C) Cash books
D) Personal diaries of bank employees

Q.9 The method where cash receipts and payments are initially recorded in the receiving and paying cash books and subsequently posted to customers’ accounts and Day Books, based on pay-in slips, cheques, and withdrawal slips, is known as which of the following?
A) Voucher System
B) Slip System
C) Double Entry System
D) Ledger Posting System

Q.10 Which of the following is an example of a contra account maintained in the general ledger of a bank to monitor agency business transactions?
A) Fixed Assets Account
B) Profit and Loss Account
C) Letters of Credit Opened Account
D) Depositors’ Savings Account

Q.11 Which of the following statements is TRUE regarding the maintenance of subsidiary books and registers in banks?
A) Overdraft accounts always have a separate ledger irrespective of the number of borrowers.
B) Subsidiary ledgers for customer accounts include ledgers for deposit accounts and various types of loan accounts.
C) Separate folios are allotted to every customer in term deposit registers.
D) Voucher summary sheets are prepared by the same person who writes the ledgers/registers.

Q.12 Which of the following practices is followed in the maintenance of Bills Registers in a bank?
A) Bills purchased and inward/outward bills for collection are recorded in a common register on a weekly basis.
B) Party-wise details of bills purchased or discounted are maintained in a ledger format to ensure limits are not exceeded.
C) No contra vouchers are prepared for bills for collection as they are only recorded on realisation.
D) Original documents are not referred to when making entries in bills registers

Q.13 Registers that are maintained to record and summarise transactions relating to specific heads of accounts such as Current Account, Savings Bank, Cash Credit, and Term Loans are commonly referred to as:
A) Cash Flow Statements
B) Balance Sheets
C) Log Books or Day Books
D) Trial Balance Sheets

Q.14 Which of the following statements is correct regarding the preparation and presentation of financial statements by a banking company in India?
A) A bank prepares its financial statements solely according to Schedule III of the Companies Act, 2013.
B) The Banking Regulation Act prescribes Form A for the profit and loss account and Form B for the balance sheet.
C) The RBI issues notes and instructions that serve as an authoritative guide for compiling financial statements under the Third Schedule of the Banking Regulation Act.
D) There are no specific RBI guidelines for preparation of financial statements by banks.

Q.15 According to Schedule 1: Capital under the comments on balance sheet items for banks, which of the following is correct?
A) Nationalised banks do not need to show separately the Government’s contribution towards World Bank projects.
B) Banking companies incorporated outside India must disclose the amount deposited with RBI under Section 11(2) of the Banking Regulation Act, 1949.
C) Calls-in-arrears are added to the called-up capital to compute paid-up capital for Indian banks.
D) Forfeited shares are deducted from the called-up capital when computing paid-up capital

Q.16 Which of the following statements regarding Schedule 2: Reserves and Surplus is correct as per RBI and Banking Regulation Act guidelines?
A) Capital reserves include all reserves that can be distributed through the profit and loss account.
B) Surplus on revaluation of assets should be classified under capital reserves.
C) The Investment Reserve Account is treated as a capital reserve according to RBI guidelines.
D) Revenue reserves include provisions made for depreciation and known liabilities.

Q.17 In the context of Rebate on Bills Discounted, which of the following is TRUE regarding the accounting treatment at the time of discounting a bill?
A) The full amount of discount earned over the life of the bill is treated as interest income immediately.
B) The unexpired portion of the discount is recognized as “Rebate on Bills Discounted” under liabilities.
C) The entire discount is credited to the customer’s account as a payable.
D) The entry to discount a bill is: Dr. Discount a/c; Cr. Bills discounted and purchased a/c

Q.18 When a bank accepts a bill or issues a letter of guarantee on behalf of a customer, how is this obligation reflected in the bank’s balance sheet?
A) Only as a liability under “Contingent Liabilities”
B) Only as an asset under “Other Assets”
C) As a contra entry, appearing both as an asset and a liability
D) Only in the Profit and Loss Account under “Provisions”

Q.19 What is the primary purpose of the disclosure requirements mandated by the Reserve Bank of India for banks, as included in the “Notes to Accounts”?
A) To comply solely with ICAI’s Accounting Standards
B) To promote transparency and market discipline by disclosing key financial and risk-related information
C) To reduce statutory audit requirements for banks
D) To eliminate the need for preparing detailed schedules to the balance sheet

Q.20 According to RBI norms, when is a term loan classified as a Non-Performing Asset (NPA)?
A) If the loan remains unpaid for 60 days
B) If the interest and/or instalment remains overdue for more than 90 days
C) If the outstanding amount exceeds the drawing power for 30 days
D) If the account shows no activity for one financial year

Q.21 What is the provisioning requirement for the unsecured portion of a doubtful asset?
A) 15% general provision on total outstanding
B) 40% if doubtful for 1-3 years
C) 100% irrespective of the period it has remained doubtful
D) 0.25% to 1% depending on type of advance