Text Book Back Questions and Answers
I. Multiple Choice Questions
Choose the Correct Answer
Question 1.
Cash book is a ………………
(a) Subsidiary book
(b) Principal book
(c) Journal proper
(d) Both subsidiary book and principal book
Answer:
(d) Both subsidiary book and principal book
Question 2.
The cash book records ………………
(a) All cash receipts
(b) All cash payments
(c) Both (a) and (b)
(d) All credit transactions
Answer:
(c) Both (a) and (b)
Question 3.
When a firm maintains a simple cash book, it need not maintain ………………
(a) Sales account in the ledger
(b) Purchases account in the ledger
(c) Capital account in the ledger
(d) Cash account in the ledger
Answer:
(d) Cash account in the ledger
Question 4.
A cash book with discount, cash and bank column is called ………………
(a) Simple cash book
(b) Double column cash book
(c) Three column cash book
(d) Petty cash book
Answer:
(c) Three column cash book
Question 5.
In Triple column cash book, the balance of bank overdraft brought forward will appear in ………………
(a) Cash column debit side
(b) Cash column credit side
(c) Bank column debit side
(d) Bank column credit side
Answer:
(d) Bank column credit side
Question 6.
Which of the following is recorded as contra entry?
(a) Withdrew cash from bank for personal use
(b) Withdrew cash from bank for office use
(c) Direct payment by the customer in the bank account of the business
(d) When bank charges interest
Answer:
(b) Withdrew cash from bank for office use
Question 7.
If the debit and credit aspects of a transaction are recorded in the cash book, it is ………………
(a) Contra entry
(b) Compound entry
(c) Single entry
(d) Simple entry
Answer:
(a) Contra entry
Question 8.
The balance in the petty cash book is ………………
(a) An expense
(b) A profit
(c) An asset
(d) A liability
Answer:
(c) An asset
Question 9.
Petty cash may be used to pay ………………
(a) The expenses relating to postage and conveyance
(b) Salary to the Manager
(c) Purchase of furniture and fixtures
(d) Purchase of raw materials
Answer:
(a) The expenses relating to postage and conveyance
Question 10.
Small payments are recorded in a book called ………………
(a) Cash book
(b) Purchase book
(c) Bills payable book
(d) Petty cash book
Answer:
(d) Petty cash book
II. Very Short Answer Questions
Question 1.
What is a cash book?
Answer:
The book in which only cash transactions are recorded in chronological order is known as the cash book. Cash receipts are recorded on the debit side and Cash payments are recorded on the credit side. It is like a subsidiary book and a principal book.
Question 2.
What are the different types of cash books?
Answer:
The main cash book may be of various types and the following are the three most common types.
Question 3.
What is a simple cash book?
Answer:
Question 4.
Give the format of ‘Single column cash book’.
Answer:
Simple Cash Book
Question 5.
What is a double column cash book?
Answer:
Question 6.
Give the format of ‘Double column cash book’.
Answer:
Cashbook with cash and discount columns
Question 7.
What is three column cash book?
Answer:
Question 8.
What is a cash discount?
Answer:
A cash discount is allowed to the parties making a prompt payment within the stipulated period of time or early payment. It is discount allowed (loss) for the creditor and discount received (gain) for the debtor who makes payment. The discount is allowed when payment is received or made and hence, the entry for discount is also passed with the entry of payment. The earlier the payment, the more may be the discount. Cash discount motivates the debtor to make the payment at an earlier date to avail discount facility.
Question 9.
What is a trade discount?
Answer:
Example:
Suppose the sale of goods for ₹ 10,000 was made and 10% was allowed as trade discount, the entry regarding sales will be made for ₹ 9,000 (10,000 – 10 percent of 10,000). In the same way, the purchaser of goods will also record purchases as 19,000).
Question 10.
What is a petty cash book?
Answer:
Business entities have to pay various small expenses like taxi fare, bus fare, postage, carriage, stationery, refreshment and other sundry items. These are small payments and repetitive in nature. If all these small payments are recorded in the main cash book, it will be loaded with lot of entries. Hence, all petty payments of the business may be recorded in a separate book, which is called a petty cash book, and the person who maintains the petty cash book is called the petty cashier.
III. Short Answer Questions
Question 1.
Explain the meaning of the imprest system of petty cash books.
Answer:
Question 2.
Bring out the differences between cash discounts and trade discounts.
Answer:
Following are the difference between cash discount and trade discount:
Question 3.
Write the advantages of maintaining a petty cash book.
Answer:
Following are the advantages of maintaining a petty cash book:
Question 4.
Write a brief note on the accounting treatment of discounts in the cash book.
Answer:
In the discount columns, cash discount, i.e., cash discount allowed and cash discount received is recorded. The net amount received is entered in the Amount column on the debit side and the net amount paid is entered in the Amount column on the credit side. For the seller who allows cash discount, it is a loss and hence it is debited and shown on the debit side of the cash book. For the person making payment, the discount received is again because less payment is made and it is credited and shown on the credit side of the cash book.
Question 5.
Briefly explain contra entry with examples.
Answer:
1. When the two accounts involved in a transaction are cash account and bank account, then both the aspects are entered in the cash book itself. As both the debit and credit aspects of a transaction are recorded in the cash book, such entries are called contra entries.
Example:
2. To denote that there are contra entries, the alphabet ‘C is written in the L.F. column on both sides.
3. Contra means that a particular entry is posted on the other side (contra) of the same book because the Cash account and Bank account are there in the cash book only and there are no separate ledger accounts needed for this purpose,
4. The alphabet ‘C’ indicates that no further posting is required and the relevant account is posted on the opposite side.
IV. Exercises
Question 1.
Enter the following transactions in a single column cash book of Seshadri for May 2017.
Answer:
In the books of Seshadri
Single column cash book
Question 2.
Enter the following transactions in a single column cash book of Pandeeswari for the month ofJune, 2017
Answer:
In the books of Pandeeswari
Single column cash book
Question 3.
Enter the following transactions in a single column cash book of Ramalingam for the month of July 2017.
Answer:
In the books of Ramalingam
Single column cash book
Question 4.
Enter the following transaction in Ahamad’s cash book with discount and cash columns.
Answer:
In the books of Ahamad’s
Cashbook with discount and cash columns
Question 5.
Enter the following transaction in Chandran’s cash book with the cash and discount column.
Answer:
In the books of chandran
Cash book with cash and discount columns
Question 6.
Enter the following transactions in cash book with discount and cash column of Anand
Answer:
In the books of Anand
Cashbook with cash and discount and cash columns
Question 7.
Write out a cash book with discount, cash, and bank columns in the books of Mahendran.
Answer:
In the books of Mahendran
There – column cash book
Question 8.
Enter the following transactions in the three column cash book of Kalyana Sundaram
Answer:
In the books of Kalyana Sundaram
There – column cash book
Question 9.
Enter the following transactions of Fathima in the cash book with cash, bank, and discount columns for the month of May 2017.
Answer:
In the books of Fathima
Three – column cash book with cash, bank, and discount
Question 10.
Enter the following transactions in the three-column cash book of Chozhan.
Answer:
In the books of Fathima
Three – column cash book with cash, bank, and discount
Question 11.
Enter the following transactions in a cash book with cash, bank, and discount columns of Sundari.
Answer:
In the books of Sundari
Three – column cash book
Question 12.
Record the following transactions in the three-column cash book of Rajeswari for the month of June 2017.
Answer:
In the books of Rajeswari
Three – column cash book
Question 13.
Record the following transactions in three column cash book of Ramachandran.
Answer:
In the books of Ramachandran
Three – column cash book
Question 14.
Record the following transactions in the three-column cash book of John Pandian.
In the books of John Pandian
Three – column cash book
Answer:
In the books of John Pandian
Three – column cash book
Question 15.
Prepare a triple column cash book of Rahim from the following transactions:
In the hooks of Rahim
Three – column cash book
Answer:
Question 16.
Prepare analytical petty cash book from the following particulars under imprest system:
Answer:
Analytical Petty Cash Book (in )
Question 17.
From the following information prepare an analytical petty cash book under imprest system:
Answer:
Analytical Petty Cash Book (in )
Question 18.
Record the following transactions in an analytical petty cash book and balance the same. On 1st November 2017, the petty cashier started with imprest cash of 2,000.
Answer:
Analytical Petty Cash Book (in )
Question 19.
Enter the following transactions in Iyyappan’s petty cash book with analytical columns under the imprest system.
Answer:
Analytical Petty Cash Book (in)
Textbook Case Study Solved
Vetri is a sole trader selling food products. He maintains a simple cash book. He sells and purchases goods both on cash and credit. He maintains the cash book by himself. He allows discounts and receives discounts. He has his personal bank account. He also has so many petty expenses. Now, he wants to establish his business. But he wants to maintain the cash book all by himself.
Now, discuss the following points:
Question 1.
What could be the reason that Vetri maintains the cash book by himself?
Answer:
He is a sole trader, he need not show the accounts to anybody else, he wants to know about profit or loss for himself only. So he maintains cash book only.
Question 2.
Is it convenient for him to record all the cash transactions in the simple cash book?
Answer:
No, it is not convenient for him to record all the cash transactions in the simple cash book.
Question 3.
Will his personal bank account serve the purpose of his business transactions?
Answer:
No, his personal bank account will not serve the purpose of his business transactions.
Question 4.
Suggest him some better ways of maintaining the cash transactions.
Answer:
Suggestions:
He may maintain a triple column cash book because he can know all cash transactions are the same account.
Instead of a personal bank account, he can open a business bank account (i.e.) current account.
Question 5.
When his business becomes large, what other books will he be maintaining?
Answer:
He will be maintaining the following other books:
o All cash transactions recorded in the cash book.
o All petty expenses are to record in the analytical petty cash book.
o All credit transactions to recorded in special-purpose books (i.e. purchases book, sales book, purchases return book and sales returns book, and proper journal.
I. Multiple Choice Questions
Choose the correct answer
Question 1.
Cash Book is a type of ________ but treated as a ________ of accounts.
a) Subsidiary book, Principal book
b) Principal book, subsidiary book
c) Subsidiary book, subsidiary book
d) Principal book, principal book
Answer:
a) Subsidiary book, Principal book
Question 2.
Cash payments are recorded on the ……………. of the cash book.
(a) debit side
(b) credit side
(c) contra
(d) journal
Answer:
(b) credit side
Question 3.
While balancing three column cash book, the discount columns are:
a) Totalled but not adjusted
b) Totalled and also adjusted
c) Totalled but not balanced
d) Balanced but not totaled
Answer:
c) Totalled but not balanced
Question 4.
……………. serves the purpose of a journal and a ledger.
(a) cash book
(b) purchase book
(c) sales book
(d) petty cash book
Answer:
(a) cash book
Question 5.
Double entry in cash book is completed when:
a) Salaries are paid by cheque
b) Withdrawal of money from the bank for personal use
c) Deposited cash into the bank
d) None of these
Answer:
c) Deposited cash into the bank
Question 6.
R.N. expands for …………….
(a) Receipts number
(b) Roll number
(c) Route number
(d) Rank number
Answer:
(a) Receipts number
Question 7.
Cash sales are entered in the ________.
a) Purchases book
b) Sales book
c) Cashbook
d) Petty cash book
Answer:
c) Cashbook
Question 8.
V.N. expands for …………….
(a) Value number
(b) Voucher number
(c) Vendor number
(d) Volume number
Answer:
(b) Voucher number
Question 9.
Subsidiary books are maintained in ________
a) Big business concerns
b) Small business concerns
c) Banks
d) None of the above
Answer:
a) Big business concerns
Question 10.
The word ……………. means payment in advance.
(a) imprest
(b) loan
(c) money
(d) petty cash
Answer:
(a) imprest
Question 11.
A cash book with discount and cash column is called ________.
a) Simple cash book
b) Double column cash book
c) Three column cash book
d) Petty cash book
Answer:
b) Double column cash book
Question 12.
When goods are purchased for cash, the entry will be recorded in the ________.
a) Cashbook
b) purchases book
c) Sales book
d) journal
Answer:
a) Cashbook
Question 13.
The balance of cash book indicates ________.
a) Net income
b) cash in hand
c) Debtors
d) creditors
Answer:
b) cash in hand
Question 14.
In triple column cash book, cash was withdrawn from bank for office use Will appear in ________.
a) Debit side of the cash book only
b) both sides of the cash book,
c) Credit side of the cash book only.
d) Journal proper
Answer:
b) both sides of the cash book,
Question 15.
If a cheque sent for collection is dishonoured, the debit is given to ________.
a) suppliers A/c
b) bank A/c
c) customers A/c
d) A and B
Answer:
c) customers A/c