Grade 10 Business Studies – Banking (11 Lessons) Quiz

Commercial banks accept deposits from individuals and businesses and provide loans, which are core banking functions. Printing currency and making laws are roles of the national government or central bank, not commercial banks.

The Central Bank of Kenya issues currency, regulates and supervises banks, and implements monetary policy to maintain financial stability.

Minors typically need a birth certificate and a guardian's identification to open a bank account so the bank can verify identity and obtain parental consent as part of Know Your Customer (KYC) rules.

An ATM allows customers to withdraw cash, check balances and sometimes deposit funds outside banking hours without a teller.

An overdraft is a credit facility allowing an account holder to draw more money than they have in the account, up to a pre-agreed limit, usually with interest and fees.

A current account (often called a transactional account) is designed for daily transactions, withdrawals and deposits, making it suitable for regular use.

A fixed deposit requires you to lock funds for a set term; in return, banks usually pay a higher interest rate compared to ordinary savings accounts.

Bank reconciliation is the process of matching the business's cash records (cash book) to the bank statement to identify and explain any differences like outstanding cheques or bank charges.

E-banking includes digital services such as mobile banking apps and integration with mobile money platforms like M-PESA, allowing users to transfer funds and pay bills electronically.

KYC procedures require banks to verify identity and obtain customer information to reduce the risk of illegal activities such as money laundering and financing of crime.

Fixed deposits lock funds for a set term, allowing banks to offer higher interest rates than regular savings accounts, which provide more flexibility.

A dishonoured cheque is one that the bank refuses to pay, often due to insufficient funds in the drawer's account or because of errors or a stop order.

A direct debit lets a company withdraw agreed amounts from a customer's account when authorised by the customer, commonly used for paying bills.

A bankers' draft is a payment instrument where the bank guarantees the funds, giving the payee confidence that the draft will be honoured.

Banks charge fees to cover costs of providing services like account maintenance, ATM usage, and transactions, and to help generate income for the bank.

Microfinance institutions focus on financial inclusion by offering small savings, credit and other financial services to people who may not access traditional banks.

Crossing a cheque adds protection by requiring the funds to be paid into a bank account, reducing the risk of theft or misuse.

Linking bank accounts to mobile money services like M-Pesa enables quick transfers, deposits and withdrawals between the wallet and bank, improving convenience.

Collateral is an asset like property or a vehicle that a borrower offers to the bank to secure a loan; it can be sold if the borrower fails to repay.

A bank statement lists all transactions affecting the account during the statement period and shows the closing balance, helping account holders track their finances.

Simple interest for one period is calculated using the formula Interest = Principal × Rate × Time (with rate as a decimal and time in years).

A savings account is designed for regular saving, offers some interest, and usually allows withdrawals, making it suitable for saving with access when needed.

A standing order is set up by the account holder to make regular fixed payments (e.g., rent) automatically at specified intervals.

Protecting PINs and passwords and changing them periodically reduces the risk of unauthorised access to bank accounts.

A mortgage is a long-term loan secured against property, commonly used by households to buy a home.

Financial inclusion aims to provide wider access to banking, credit, savings and insurance for all segments of society, including the poor and rural populations.

The CBK supervises banks, issues currency, manages monetary policy and works to keep inflation low and the financial system stable.

Commercial banks take deposits, make loans, provide current and savings accounts, and offer payment services such as transfers and cards.

Savings accounts are designed to encourage saving by paying interest and often restricting frequent withdrawals, while current accounts are for frequent transactions.

An overdraft is a short-term borrowing arrangement allowing a customer to have a negative balance up to a limit, usually with interest or fees.

Collateral secures a loan; if the borrower defaults, the bank can sell the pledged asset to recover the debt.

KYC requires banks to collect identity and address information to reduce risks of fraud, terrorism financing and money laundering.

Mobile money platforms allow electronic transfers and payments via phones; they offer many bank-like services but are not banks and are regulated differently.

Bank reconciliation identifies timing differences, bank charges, unpresented cheques and errors so records match the bank statement.

The PIN authenticates the card user; sharing it risks theft and unauthorized transactions.

Standing orders are set by account holders to automate regular fixed payments like rent or school fees.

Direct debits let organizations take changing amounts (e.g., utility bills) with authorisation; standing orders are fixed regular payments initiated by the payer.

Interest rate is the cost of borrowing money or the reward for saving, expressed as a percentage of the principal.

Simple interest uses the initial principal to calculate interest each period; it does not compound on previously earned interest.

Compound interest means interest is added to the principal and future interest is calculated on the increased amount, so savings grow faster.

A credit card provides a short-term loan for purchases up to an approved limit; unpaid balances attract interest.

A cheque instructs the bank to pay money from the drawer's account to the person named or bearer when presented.

A bounced cheque is not paid by the bank because the account lacks sufficient funds or there is a technical/legal problem; this can lead to penalties.

Bank statements show deposits, withdrawals, fees and the running balance so customers can monitor and reconcile their accounts.

Banks charge fees for various services and facilities; customers should check the tariff sheet to avoid surprises.

Agent banking uses retail outlets to offer deposits, withdrawals and transfers, improving access especially in rural areas.

MFIs promote financial inclusion by offering small-scale credit, savings and sometimes training to people excluded from formal banks.

An exchange rate shows the value of one currency when exchanged for another, important for travellers and businesses dealing with imports/exports.

SWIFT provides standardized, secure messages between banks worldwide to facilitate international payments and communication.

Bank guarantees back the obligations of a client to a third party, giving confidence in trade and contracts by reducing risk of non-payment.

Financial inclusion aims to bring more people into the formal financial system through banks, mobile money, Saccos and microfinance, promoting economic participation.