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Cash Book: NBSE Class 9 Book Keeping solutions
Get summaries, questions, answers, solutions, notes, extras, theories, practicles, PDF, and guide of Chapter 6 Cash Book, NBSE Class 9 Book Keeping (BK) textbook, which is part of the syllabus of students studying under Nagaland Board. These solutions, however, should only be treated as references and can be modified/changed.
If you notice any errors in the notes, please mention them in the comments
Summary
The chapter explains the Cash Book which is a special book used to record cash and bank transactions. All cash received and paid are noted in this book. It acts as both a journal and a ledger. This means it records transactions as they happen and also keeps track of all cash balances. Only cash and bank dealings are entered here. Non-cash transactions are not recorded in this book.
The Cash Book has two sides. The left side records cash coming in, called receipts. The right side shows cash going out, known as payments. Each page has columns for date, details, voucher number, ledger folio, and amount. Every transaction affecting cash or bank appears here. Transactions that involve both cash and bank affect both sides of the book. Such entries are marked with a ‘C’ in the ledger folio column.
There are different types of Cash Books. A Single Column Cash Book only records cash transactions. A Double Column Cash Book includes both cash and bank columns. Sometimes, businesses use a Triple Column Cash Book that also includes discounts. For small expenses, firms keep a Petty Cash Book.
The chapter describes how to handle common transactions. When cash is deposited into the bank, it is recorded on both sides. One side shows cash going out, and the other shows bank balance increasing. If a cheque is received and not deposited the same day, it is first recorded in a journal. Once deposited, it enters the Cash Book.
Some entries like drawings occur when a person takes money for personal use. Endorsement happens when a cheque received is given to someone else instead of depositing it in the bank. Bank charges are fees taken by the bank. Noting charges are penalties if a cheque bounces. These too have specific recording methods.
At the end of a period, the Cash Book is balanced. This involves comparing total receipts with total payments. Any leftover cash or bank balance is carried forward to the next period. Balancing ensures that records match actual cash in hand and bank statements.
The Petty Cash Book follows either an ordinary system or an imprest system. In the imprest system, a fixed amount is given to the petty cashier at the start. After spending, the cashier gets reimbursed for the exact amount spent. This way, he again starts with the fixed amount. The petty cash book can be simple or analytical based on how expenses are categorized.
Recording every detail helps maintain accurate financial records. Transactions involving cash or bank need careful entry. Proper documentation prevents errors and fraud. Through these methods, businesses ensure their cash records are always correct.
Textbook solutions
Multiple Choice Questions (MCQs)
1. Which of the following transactions are recorded in the Cash Book?
(a) Cash receipts and payments
(b) Credit purchases only
(c) Credit sales only
(d) Both credit purchases and credit sales
Answer : (a) Cash receipts and payments
2. When a firm maintains a cash book, it need not maintain………….
(a) Journal Proper
(b) Sales Book
(c) Purchase Book
(d) Cash and Bank Accounts in Ledger
Answer : (d) Cash and Bank Accounts in Ledger
3. If the debit as well as credit aspects of a transaction are recorded in the cash book, it is called………….
(a) Contra Entry
(b) Compound Entry
(c) Opening Entry
(d) Adjustment Entry
Answer : (a) Contra Entry
4. Which of the following will be recorded as Contra Entry?
(a) Cash directly deposited into bank by a customer
(b) Payment made to creditor by cheque
(c) Cash deposited into bank
(d) Cash sales
Answer : (c) Cash deposited into bank
5. Which is not a Contra Entry in the cash book?
(a) Cash deposited into bank
(b) Cash withdrawn from bank
(c) Cash withdrawn from bank for personal use
(d) None of these
Answer : (c) Cash withdrawn from bank for personal use
6. The petty cash book is used for recording:
(a) Cash transactions
(b) Credit receipts and payments
(c) Petty Cash Payments
(d) None of these
Answer : (c) Petty Cash Payments
7. The term imprest system is used in relation to:
(a) Purchases Book
(b) Credit transactions
(c) Sales Book
(d) Petty Cash Book
Answer : (d) Petty Cash Book
True/False
1. Cash Book is a real book.
Answer: True
2. Cash book is both a ledger account and subsidiary book.
Answer: True
3. Cash and credit transactions are recorded in Cash Book.
Answer: False
4. Bank column of cash book always shows debit balance.
Answer: False
Assertion Reason Based Questions
Choose the correct option:
A. Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of the Assertion (A).
B. Both Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of Assertion (A).
C. Only Assertion (A) is correct.
D. Only Reason (R) is correct.
1. Assertion: Petty cash book is prepared only for petty expenses and not for petty incomes.
Reason: The purpose of preparing petty cash is to separate the petty items from now petty receipts and payments.
Answer: A
2. Assertion: Cash Book records cash receipts and payments.
Reason: Cash receipts are recorded on the debit side of Cash book and cash payments on the credit side.
Answer: A
Statement Based Questions
Choose the correct option from the options given below:
A. Statement I is true and II is false.
B. Statement II is true and I is false.
C. Both the statements are false.
D. Both the statements are true.
1. Statement I: The term imprest system is used in relation to Petty Cash Book.
Statement II: The petty cash book issued for recording petty cash payments.
Answer: D
2. Statement I: Cash Book is a subsidiary book or special purpose book because it records only cash transactions.
Statement II: Cash book serves as a documentary evidence for the available cash balances.
Answer: D
Short Answer Type-l Questions
1. Define Cash Book.
Answer : Cash Book is a book of prime entry in which all transactions relating to cash receipts and cash payments are recorded in a chronological order, i.e., as they occur.
2. Write the types of Cash Book.
Answer : The types of Cash Book are:
- Single column cash book or Simple cash book.
- Double column cash book or Two-columns cash book.
- Triple column cash book.
In addition to the main Cash Book, firms sometimes also maintain a Petty Cash Book.
3. What is Single Column Cash Book?
Answer : A Single Column Cash Book, also known as a Simple Cash Book, is the simplest form of Cash Book. It records only the receipts and payments of cash, similar to an account with one amount column on each side. It records only transactions related to cash.
4. What do you mean by Double Column Cash Book?
Answer : A Double Column Cash Book is a type of cash book that has two columns representing amount figures on both sides. It may include columns for Cash and Discount, Bank and Discount, or Cash and Bank. Specifically, when it has Cash and Bank Columns, it records cash transactions in the cash column and bank transactions in the bank column.
5. What is Contra Entry?
Answer : A Contra Entry is an entry where both the debit and credit aspects of a transaction are recorded in the Cash Book itself. Such entries affect both the Cash Column and the Bank Column, such as when cash is deposited into the bank or withdrawn from the bank for office use. These entries are denoted by writing the letter ‘C’ in the L.F. column on both sides of the Cash Book.
6. Explain Petty Cash Book.
Answer : The Petty Cash Book is the book used for recording expenses involving small amounts. Besides petty expenses, receipts from the main cash are also recorded.
There are two systems of maintaining the Petty Cash Book:
- Ordinary System or Simple System of Petty Cash Book: In this system, an advance is given to the Petty Cashier. The amount given in advance may not be fixed, and this system is flexible.
- Imprest System of Petty Cash Book: Under this system, the amount required to meet various petty expenses is estimated for a certain period (e.g., a week, a fortnight, or a month). This amount, called the ‘imprest amount’, is given to the Petty Cashier at the beginning of the period.
7. What is imprest system?
Answer : The imprest system is a method used in relation to the Petty Cash Book. Under this system, an estimated amount required to meet various petty expenses for a specific period, such as a week, fortnight, or month, is determined and given to the Petty Cashier at the beginning of the period. This amount is referred to as the ‘imprest amount.’ The Petty Cashier uses this imprest amount to pay for all petty expenses and records them in the Petty Cash Book. At the end of the period, the Petty Cashier submits the vouchers to the head cashier, who reimburses the exact amount spent, ensuring the Petty Cashier again has the fixed imprest amount at the start of the next period.
Short Answer Type-II Questions
1. What is Cash Book? Explain its features.
Answer : Cash Book is a book of prime entry in which all transactions relating to cash receipts and cash payments are recorded in a chronological order, i.e., as they occur.
The features of the Cash Book are:
- Only cash and bank transactions are recorded in the Cash Book.
- Cash and cheque receipts are recorded on the debit side, while cash and cheque payments are recorded on the credit side.
- It records only one aspect of the transaction, i.e., cash and bank; double entry is completed by means of posting in the ledger to the respective account.
- Cash and bank transactions are recorded in the Cash Book in a chronological order, i.e., in the order they take place.
- It performs the role of both the Journal and the Ledger at the same time.
- Unlike any other account or book, the Cash Book is balanced daily.
2. Explain the types of Cash Book.
Answer : The types of Cash Book are as follows:
- Single Column Cash Book or Simple Cash Book : This is the simplest form of Cash Book, which records only cash receipts and payments. Its format is similar to an account, with one amount column on each side. The left-hand side, known as ‘debit’, records cash receipts, while the right-hand side, known as ‘credit’, records cash payments.
- Double Column Cash Book or Two-Columns Cash Book : This type of Cash Book has two columns representing amount figures on both sides. It may include columns for cash and discount, bank and discount, or cash and bank. In this unit, the Double Column Cash Book having Cash and Bank Columns is explained, where in addition to the Cash Column, a Bank Column is also maintained on each side to record cash and bank transactions.
- Triple Column Cash Book : This type of Cash Book contains three columns on each side, typically for recording cash, bank, and discount transactions.
In addition to the main Cash Book, firms sometimes maintain a Petty Cash Book , though it is not discussed in detail in this unit.
3. Explain Single Column Cash Book with the help of example.
Answer : A Single Column Cash Book, also known as a Simple Cash Book, is the simplest form of a Cash Book. It records only cash receipts and payments. Its format resembles an account with one amount column on each side. The left-hand side, known as the ‘debit’ side, records cash receipts, while the right-hand side, known as the ‘credit’ side, records cash payments. Only cash transactions are recorded in this book, excluding non-cash transactions, cheques received or issued, and cash discounts.
For example, if Ramesh started a business with ₹2,00,000 cash, it would be recorded on the debit side as “To Capital A/c.” Similarly, if he purchased goods for ₹40,000 in cash, it would be recorded on the credit side as “By Purchases A/c.” At the end of the period, the Cash Book is balanced by deducting total payments from total receipts to determine the closing cash balance.
4. What do you mean by Petty Cash Book? Explain the system of Petty Cash Book.
Answer : A Petty Cash Book is the book which is used for the purpose of recording expenses involving small amounts. Besides petty expenses, receipts from main cash are also recorded. The person who maintains this book is called the ‘petty cashier’.
The system of Petty Cash Book includes two types:
- Ordinary System or Simple System of Petty Cash Book : In this system, an advance is given to the Petty Cashier. The amount given in advance may not be fixed, and this system is flexible.
- Imprest System of Petty Cash Book : Under this system, the amount required to meet various petty expenses is estimated for a certain period (say, for a week, a fortnight, or a month). This amount, called the ‘imprest amount’, is given to the Petty Cashier at the beginning of the period.
5. Explain:
(a) Contra Entry
Answer : A contra entry is an entry where both the debit and credit aspects of a transaction are recorded in the cash book itself. Such entries affect both the cash column and the bank column of the cash book. For example, when cash is deposited into the bank or withdrawn from the bank for office use, it is recorded as a contra entry because it impacts both cash and bank balances.
(b) Cash deposited into bank
Answer : When cash is deposited into the bank, it increases the bank balance and reduces the cash balance. This transaction is recorded in the cash book by entering “To Cash A/c” in the particulars column on the debit side under the bank column, and “By Bank A/c” in the particulars column on the credit side under the cash column.
(c) Drawings
Answer : Drawings refer to the amount withdrawn by the proprietor for personal use. In the cash book, this amount is credited by recording “By Drawings A/c.” If the withdrawal is made in cash, the amount is shown in the cash column, and if it is drawn from the bank, it is shown in the bank column.
(d) Dishonour of cheque.
Answer : When a cheque received from a customer and deposited into the bank for collection is dishonoured, an entry is made on the credit side of the cash book. The amount of the dishonoured cheque is entered in the bank column, and the name of the customer is mentioned in the particulars column. For instance, if a cheque for ₹2,000 received from Ram Kumar is dishonoured, it will be recorded as “By Ram Kumar” in the cash book under the bank column.
Long Answer Type Questions
1. What is Cash Book? Explain its features and types.
Answer :Cash Book is a book of prime entry in which all transactions relating to cash receipts and cash payments are recorded in a chronological order, i.e., as they occur. According to Andrew Munro, “Cash book is used for recording the receipts and payments of money, whether in coins, notes, cheques, postal orders, bank drafts, etc.”
The features of Cash Book are:
- Only cash and bank transactions are recorded in the Cash Book.
- Cash and cheque receipts are recorded on the debit side while cash and cheque payments are recorded on the credit side.
- It records only one aspect of the transaction, i.e., cash and bank; double entry is completed by means of posting in the ledger to the respective account.
- Cash and bank transactions are recorded in the Cash Book in a chronological order, i.e., in the order they take place.
- It performs the role of both the Journal and the Ledger at the same time.
- Unlike any other account or book, cash book is balanced daily.
The types of Cash Book are:
- Single column cash book or Simple cash book.
- Double column cash book or Two-columns cash book.
- Triple column cash book.
In addition to the main Cash Book, firms sometimes also maintain a Petty Cash Book.
2. What do you mean by Petty Cash Book? Explain the systems of Petty Cash Book.
Answer : Petty Cash Book is the book which is used for the purpose of recording expenses involving small amounts. Besides petty expenses, receipts from main cash are recorded. The person who maintains this book is called the ‘petty cashier’.
In a business, besides large payments, a number of small payments, such as conveyance, stationery, cartage, etc., have to be made. It is not advisable to record all these transactions into the Cash Book, otherwise the clerical work will increase substantially. Therefore, it is usual for firms to appoint a person as ‘Petty Cashier’ and to entrust the task of making small payments, say, below ₹ 500, to him. Of course, he is reimbursed for the payments made.
There are two types of systems of Petty Cash Book:
- Ordinary System or Simple System of Petty Cash Book : In this system, an advance is given to the Petty Cashier. The amount given in advance may not be fixed. This system is flexible.
- Imprest System of Petty Cash Book : Under this system, the amount required to meet out various petty expenses is estimated for a certain period (say for a week, a fortnight, or a month). The amount so ascertained is given to the Petty Cashier in the beginning of a period. This amount is called ‘imprest amount’. The petty cashier goes on paying all petty expenses out of this imprest amount and records them in the petty cash book maintained by him. At the end of the given period, say after a month, the petty cashier produces the vouchers before the head cashier who, after having examined the petty cash book, reimburses the amount actually spent by the petty cashier. Thus, he will again have the fixed amount in the beginning of the new period reimbursed.
Advantages of Imprest System of Petty Cash:
(i) The time of chief cashier is saved when petty expenses are recorded in petty cash books.
(ii) Every petty expense is to be supported by vouchers duly attested. This minimises chances of frauds.
(iii) It gives the idea to check whether the amount advanced as imprest is sufficient to meet petty expenses.
(iv) Petty expenses are kept within the limits of imprest since the petty cashier can never spend more than the available petty cash.
Practical Problems
Questions
Single Column Cash Book
1. Enter the following transactions in a Single Column Cash Book:
| Date | Particulars | Amount (₹) |
|---|---|---|
| 2021 | ||
| March 1 | Commenced business with Cash | 40,000 |
| March 2 | Bought goods for Cash | 6,000 |
| March 5 | Sold goods for Cash | 5,000 |
| March 10 | Goods purchased from Ramit on Credit | 20,000 |
| March 13 | Paid to Ramit | 15,000 |
| March 15 | Cash Sales | 6,000 |
| March 18 | Purchased furniture for Office | 5,000 |
| March 20 | Paid Wages | 400 |
| March 24 | Paid Rent | 500 |
| March 26 | Received Commission | 700 |
| March 28 | Withdrew for personal expenses | 1,200 |
| March 31 | Paid Salary | 800 |
Solution: Check below
2. Enter the following transactions of Mr. Ripinder in a Single Column Cash Book and balance it:
| Date | Particulars | Amount (₹) |
|---|---|---|
| 2022 | ||
| Jan. 1 | Ripinder started business with capital | 2,00,000 |
| Jan. 2 | Purchased furniture | 50,000 |
| Jan. 3 | Purchased goods for cash | 30,000 |
| Jan. 5 | Paid freight | 750 |
| Jan. 7 | Sold goods for cash | 28,000 |
| Jan. 10 | Paid to Ronak | 20,000 |
| Jan. 15 | Sold goods for cash | 10,000 |
| Jan. 20 | Paid wages | 2,250 |
| Jan. 25 | Purchased goods | 20,000 |
| Jan. 31 | Paid rent | 5,000 |
Solution: Check below
3. Prepare Simple Cash Book from the following transactions of Mr. Sudhir of Delhi:
| Date | Particulars | Amount (₹) |
|---|---|---|
| 2022 | ||
| April 1 | Mr. Sudhir commenced business with cash | 80,000 |
| April 3 | He bought goods for cash | 50,000 |
| April 5 | Sold goods for cash | 1,000 |
| April 6 | Received cash from Mr. Manohar Lal | 3,600 |
| April 9 | Paid into Bank | 30,000 |
| April 13 | Paid cash to Vidant | 2,150 |
| April 16 | Sold goods for cash | 15,000 |
| April 17 | Paid for stationery | 150 |
| April 18 | Paid for office furniture | 1,850 |
| April 21 | Received from Mr. Kailash Chand | 6,800 |
| April 22 | Paid for advertising | 900 |
| April 25 | Purchased postage stamps | 80 |
| April 28 | Paid rent | 1,000 |
| April 30 | Paid electricity charges | 150 |
Solution: Check below
4. From the following particulars of Mr. Ramesh, prepare Simple Cash Book and balance the same:
| Date | Particulars | Amount (₹) |
|---|---|---|
| 2022 | ||
| April 1 | Ramesh started business with cash | 2,00,000 |
| April 2 | Opened a bank account and deposited | 1,50,000 |
| April 4 | Purchased goods for cash | 40,000 |
| April 6 | Sold goods for cash | 20,000 |
| April 8 | Purchased furniture for cash | 15,000 |
| April 9 | Purchased goods on credit from K & Co. | 35,000 |
| April 10 | Sold goods for cash | 55,000 |
| April 15 | Withdrew cash from bank | 50,000 |
| April 30 | Paid electricity bill | 5,000 |
| April 30 | Paid rent to landlord | 10,000 |
| April 30 | Paid salaries | 12,000 |
Solution: Check below
Double Column Cash Book (Cash and Bank Columns)
5. Enter the following transactions in Cash Book with Cash and Bank columns of M/s. Gupta Store:
| Date | Particulars | Amount (₹) |
|---|---|---|
| 2021 | ||
| June 1 | Cash in Hand ₹ 800, Bank overdraft ₹ 5,700 | |
| June 7 | Received a cheque from Bharati, Discount Allowed ₹ 150 | 3,250 |
| June 9 | Deposited the above cheque into Bank | |
| June 15 | Cheque received from Panna Lal | 1,200 |
| June 20 | Bharati’s cheque returned dishonoured | |
| June 28 | Panna Lal’s cheque was endorsed to Kamal | |
| June 30 | Income tax paid by cheque | 120 |
Solution: Check below
6. Enter the following transactions in a suitable Cash Book of Mr. Kapil and show the closing balances of cash and bank:
| Date | Particulars | Amount (₹) |
|---|---|---|
| 2023 | ||
| Jan. 1 | Balance of Cash in Hand ₹ 200 and at Bank ₹ 1,800 | |
| Jan. 3 | Received from Ramesh in cash | 800 |
| Deposited out of the above into Bank | 500 | |
| Jan. 4 | Cash sales | 600 |
| Jan. 5 | Paid salaries by cheque | 800 |
| Jan. 6 | Repairs of typewriters | 300 |
| Jan. 8 | Paid to Modern Co., half cash and half in cheque | 600 |
| Jan. 9 | Withdrew ₹ 200 from Bank. Paid packing charges ₹ 30 | |
| Jan. 10 | Sold goods for cash and paid half the proceeds into Bank | 2,800 |
| Jan. 12 | Cash purchases less trade discount 5% | 800 |
Solution: Check below
7. Enter the following transactions in Double Column Cash Book with cash and bank column of Shri Hareesh:
| Date | Particulars | Amount (₹) |
|---|---|---|
| 2022 | ||
| Jan. 1 | Cash at office ₹ 123, and Bank Balance (Cr.) 2,575 | |
| Jan. 2 | Cash sales | 1,570 |
| Jan. 3 | Deposited into bank | 1,500 |
| Jan. 5 | Mohan settled his account for ₹ 750 by giving a cheque for | 730 |
| Jan. 7 | Mohan’s cheque deposited into bank | |
| Jan. 10 | Bought goods and paid by cheque | 450 |
| Jan. 13 | Purchased stationery | 75 |
| Jan. 18 | Mohan’s cheque returned dishonoured | |
| Jan. 20 | Received a cheque from Prabhu which is deposited into Bank | 1,500 |
| Jan. 25 | Withdrew for office use | 475 |
| Jan. 31 | Paid salary for cheque ₹ 1,000 and rent in cash ₹ 150 |
Solution: Check below
8. Compile Cash and Bank Column Cash Book from the following transactions:
| Date | Particulars | Amount (₹) | Date | Particulars | Amount (₹) |
|---|---|---|---|---|---|
| 2021 | 2021 | ||||
| June 1 | Cash Balance | 5,000 | June 21 | Drawn from Bank | 5,000 |
| June 1 | Bank Balance | 17,500 | June 29 | Paid office salaries in cash | 4,000 |
| June 5 | Cash received from sales of shares | 5,000 | June 30 | Sold goods for cash and banked the same | 8,000 |
| June 6 | Cheque received as advance against sale, paid into bank | 50,000 | June 30 | Paid rent by cheque | 1,000 |
| June 7 | Paid S. Bose by cheque | 12,500 | June 30 | Paid into Bank | 7,500 |
| Discount received | 200 | ||||
| June 9 | Paid wages in cash | 3,000 | |||
| June 20 | Received from A. Mukerji by a cheque and sent to bank | 6,000 |
Solution: Check below
9. Enter the following transactions in Double Column Cash Book with Cash and Bank Column of Raj & Co.:
| Date | Particulars | Amount (₹) |
|---|---|---|
| 2020 | ||
| March 1 | Cash balance | 2,00,000 |
| Bank overdraft | 48,00,000 | |
| March 2 | Introduced additional capital | 48,00,000 |
| March 5 | Deposited into bank | 32,00,000 |
| March 8 | Received from Rahul | 3,56,000 |
| Allowed discount | 2,000 | |
| March 12 | Paid to Girdhari Lal | 4,80,000 |
| Received discount | 12,000 | |
| March 15 | Bought goods for cash | 2,80,000 |
| March 17 | Sold goods for cash | 4,00,000 |
| March 18 | Purchased furniture by cheque | 6,00,000 |
| March 19 | Received a crossed cheque from Sohail ₹ 92,000 in full settlement of debt of ₹ 96,000 and deposited the same in bank | |
| March 22 | Paid commission through cheque | 60,000 |
| March 25 | Withdrew for personal use | 1,20,000 |
| March 26 | Paid to Khanna by cheque | 2,80,000 |
| Discount received | 8,000 | |
| March 27 | Withdrew for personal use | 1,20,000 |
| March 29 | Received dividend by cheque and deposited in bank on the same day | 12,000 |
| March 30 | Paid electricity bill | 20,000 |
| March 31 | Paid salary | 1,40,000 |
| March 31 | Paid rent | 80,000 |
| March 31 | Paid wages | 60,000 |
Solution: Check below
10. Prepare a Petty Cash Book on the Imprest System from the following particulars:
| Date | Particulars |
|---|---|
| July 1 | Received ₹ 15,000 from the Cashier |
| July 3 | Purchased Stationery ₹ 100 |
| July 6 | Paid for telegram ₹ 30, for charity ₹ 50 |
| July 7 | Purchased soap ₹ 55, Paid for Newspaper bill ₹ 185 |
| July 9 | Paid taxi fare ₹ 85, Coolie ₹ 15 |
| July 12 | Paid postal expenses ₹ 70 |
| July 14 | Paid auto fare ₹ 55, Paid for courier services ₹ 35 |
| July 25 | Speed Post Charges ₹ 84, Telegram charges ₹ 46 |
| July 26 | Paid carriage ₹ 43 |
| July 27 | Refreshment Expenses ₹ 87, Photostating charges ₹ 70 |
| July 28 | Pen/Pencils ₹ 155 |
| July 29 | STD calls charges ₹ 95 |
| July 31 | Loading charges ₹ 80 |
Solution: Check below
11. Enter the following transactions in the petty cash book of Sh. Sahil with appropriate analysis columns. Balance it on 15th May 2022 and show the amount which should be received from the cashier to make up the amount of the ‘imprest’ ₹ 490:
| Date | Particulars | Amount (₹) |
|---|---|---|
| 2022 | ||
| May 1 | Received from cashier ₹ 450, the amount required to make up the amount of the ‘imprest’ viz., ₹ 490 | 490 |
| May 1 | Purchased stamps | 50 |
| May 1 | Paid for carriage | 20 |
| May 3 | Paid for office cleaning | 10 |
| May 3 | Paid for telegram to Surinder Singh | 20 |
| May 3 | Paid railway fare | 30 |
| May 3 | Paid bus fare | 30 |
| May 8 | Paid for telephone calls | 20 |
| May 8 | Tea to office staff | 20 |
| May 10 | Paid reward to servants | 10 |
| May 10 | Bought shorthand note books for office | 50 |
| May 10 | Paid wages to casual labour | 30 |
| May 12 | Purchased Pens and Pencils | 40 |
| May 12 | Paid for envelopes | 20 |
| May 15 | Paid for repairs to typewriter | 10 |
Solution: Check below
12. Prepare Petty Cash Book from the following transactions. The imprest amount is ₹ 2,500:
| Date | Particulars | Amount (₹) |
|---|---|---|
| January | ||
| 1 | Paid cartage | 60 |
| 2 | STD charges | 50 |
| 2 | Bus fare | 25 |
| 3 | Postage | 35 |
| 4 | Refreshment for employees | 86 |
| 6 | Courier charges | 35 |
| 8 | Refreshment of customer | 54 |
| 10 | Cartage | 32 |
| 15 | Taxi fare to manager | 78 |
| 18 | Stationery | 75 |
| 20 | Bus fare | 20 |
| 22 | Fax charges | 40 |
| 25 | Telegrams charges | 40 |
| 27 | Postage stamps | 250 |
| 29 | Repair of furniture | 120 |
| 30 | Laundry expenses | 150 |
| 31 | Miscellaneous expenses | 160 |
Solution: Check below
Solutions
1. Solution
Single Cash Book
| Date | Particulars | V.No. | L.F. | Amount (Dr.) | Date | Particulars | V.No. | L.F. | Amount (Cr.) |
|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2021 | ||||||||
| March 1 | To Capital A/c | 40,000 | March 2 | By Purchases A/c | 6,000 | ||||
| March 5 | To Sales A/c | 5,000 | March 13 | By Ramit A/c | 15,000 | ||||
| March 15 | To Sales A/c | 6,000 | March 18 | By Furniture A/c | 5,000 | ||||
| March 26 | To Commission A/c | 700 | March 20 | By Wages A/c | 400 | ||||
| March 24 | By Rent A/c | 500 | |||||||
| March 28 | By Drawings A/c | 1,200 | |||||||
| March 31 | By Salaries A/c | 800 | |||||||
| March 31 | By Balance c/d | 22,800 | |||||||
| 51,700 | 51,700 | ||||||||
| April 1 | To Balance b/d | 22,800 |
2. Solution
In the Books of Mr. Ripinder
| Date | Particulars | Amount (₹) | Date | Particulars | Amount (₹) |
|---|---|---|---|---|---|
| 2022 | 2022 | ||||
| Jan. 1 | To Capital A/c | 2,00,000 | Jan. 2 | By Furniture A/c | 50,000 |
| Jan. 7 | To Sales A/c | 28,000 | Jan. 3 | By Purchases A/c | 30,000 |
| Jan. 15 | To Sales A/c | 10,000 | Jan. 5 | By Freight A/c | 750 |
| Jan. 10 | By Ronak A/c | 20,000 | |||
| Jan. 20 | By Wages A/c | 2,250 | |||
| Jan. 25 | By Purchases A/c | 20,000 | |||
| Jan. 31 | By Rent A/c | 5,000 | |||
| Jan. 31 | By Balance c/d | 1,10,000 | |||
| 2,38,000 | 2,38,000 | ||||
| Feb. 1 | To Balance b/d | 1,10,000 |
3. Solution
In the Books of Mr. Sudhir, Delhi
| Date | Particulars | Amount (₹) | Date | Particulars | Amount (₹) |
|---|---|---|---|---|---|
| 2022 | 2022 | ||||
| April 1 | To Capital A/c | 80,000 | April 3 | By Purchases A/c | 50,000 |
| April 5 | To Sales A/c | 1,000 | April 9 | By Bank A/c | 30,000 |
| April 6 | To Manohar Lal A/c | 3,600 | April 13 | By Vidant A/c | 2,150 |
| April 16 | To Sales A/c | 15,000 | April 17 | By Stationery A/c | 150 |
| April 21 | To Kailash Chand A/c | 6,800 | April 18 | By Furniture A/c | 1,850 |
| April 22 | By Advertising A/c | 900 | |||
| April 25 | By Postage A/c | 80 | |||
| April 28 | By Rent A/c | 1,000 | |||
| April 30 | By Electricity A/c | 150 | |||
| April 30 | By Balance c/d | 20,120 | |||
| 1,06,400 | 1,06,400 | ||||
| May 1 | To Balance b/d | 20,120 |
4. Solution
In the Books of Mr. Ramesh
| Date | Particulars | Amount (₹) | Date | Particulars | Amount (₹) |
|---|---|---|---|---|---|
| 2022 | 2022 | ||||
| April 1 | To Capital A/c | 2,00,000 | April 2 | By Bank A/c | 1,50,000 |
| April 6 | To Sales A/c | 20,000 | April 4 | By Purchases A/c | 40,000 |
| April 10 | To Sales A/c | 55,000 | April 8 | By Furniture A/c | 15,000 |
| April 15 | To Bank A/c | 50,000 | April 30 | By Electricity A/c | 5,000 |
| April 30 | By Rent A/c | 10,000 | |||
| April 30 | By Salaries A/c | 12,000 | |||
| April 30 | By Balance c/d | 93,000 | |||
| 3,25,000 | 3,25,000 | ||||
| May 1 | To Balance b/d | 93,000 |
5. Solution
Double Column Cash Book of M/s. Gupta Store
| Date | Particulars | L.F. | Cash (₹) | Bank (₹) | Date | Particulars | L.F. | Cash (₹) | Bank (₹) |
|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2021 | ||||||||
| June 1 | To Balance b/d (Cash in Hand) | 800 | June 1 | By Balance b/d (Bank O/D) | 5,700 | ||||
| June 7 | To Bharati | 3,250 | June 9 | By Bank (Cheque Deposited) | C | 3,250 | |||
| June 9 | To Cash (Cheque Deposited) | C | 3,250 | June 20 | By Bank (Bharati’s Cheque Dishonoured) | 3,250 | |||
| June 15 | To Panna Lal | 1,200 | June 28 | By Kamal (Panna Lal’s Cheque Endorsed) | 1,200 | ||||
| June 30 | By Income Tax | 120 | |||||||
| June 30 | By Balance c/d (Bank O/D) | 5,820 | June 30 | By Balance c/d (Cash) | 800 | ||||
| 5,250 | 9070 | 5,250 | 9070 | ||||||
| July 1 | To Balance b/d (Cash) | 800 | July 1 | By Balance b/d (Bank O/D) | 5,820 |
6. Solution
Double Column Cash Book of Mr. Kapil
| Date | Particulars | L.F. | Cash (₹) | Bank (₹) | Date | Particulars | L.F. | Cash (₹) | Bank (₹) |
|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2023 | ||||||||
| Jan. 1 | To Balance b/d | 200 | 1800 | Jan. 5 | By Salaries | 800 | |||
| Jan. 6 | By Repairs | 300 | |||||||
| Jan. 3 | To Ramesh | 300 | 500 | Jan. 8 | By Modern Co. | 300 | 300 | ||
| Jan. 4 | To Cash Sales | 600 | Jan. 9 | By Cash | C | 200 | |||
| Jan. 9 | To Bank | C | 200 | Jan. 9 | By Packing Charges | 30 | |||
| Jan. 10 | To Cash Sales | 1400 | 1400 | Jan. 12 | By Purchases | 760 | |||
| Jan. 31 | By Balance c/d | 1310 | 2,400 | ||||||
| 2700 | 3700 | 2700 | 3,700 | ||||||
| Feb. 1 | To Balance b/d | 1310 | 2,400 |
7. Solution
Double Column Cash Book
| Date | Particulars | L.F. | Cash (₹) | Bank (₹) | Date | Particulars | L.F. | Cash (₹) | Bank (₹) |
|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2022 | ||||||||
| Jan. 1 | To Balance b/d | 123 | Jan. 1 | By Balance b/d | 2,575 | ||||
| Jan. 2 | To Cash Sales | 1,570 | Jan. 3 | By Bank | C | 1,500 | |||
| Jan. 7 | By Bank | C | 730 | ||||||
| Jan. 3 | To Cash | C | 1,500 | Jan. 10 | By Purchase | 450 | |||
| Jan. 5 | To Mohan | 730 | Jan. 13 | By Stationery | 75 | ||||
| Jan. 7 | To Cash | C | 730 | Jan. 18 | By Mohan | 730 | |||
| Jan. 20 | To Prabhu | 1,500 | Jan. 25 | By Cash | C | 475 | |||
| Jan. 25 | To Bank | C | 475 | Jan. 31 | By Rent | 150 | |||
| Jan. 31 | By Balance c/d | 1500 | Jan. 31 | By Salary | 1,000 | ||||
| Jan. 31 | By Balance c/d | 443 | |||||||
| 5796 | 5230 | 5796 | 5230 | ||||||
| Feb. 1 | To Balance b/d | 443 | Feb. 1 | By Balance b/d | 1,500 |
8. Solution
Double Column Cash Book
| Date | Particulars | L.F. | Cash (₹) | Bank (₹) | Date | Particulars | L.F. | Cash (₹) | Bank (₹) |
|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2021 | ||||||||
| June 1 | To Balance b/d | 5,000 | 17,500 | June 7 | By S. Bose | 12,500 | |||
| June 5 | To Sales of Shares | 5,000 | June 9 | By Wages | 3,000 | ||||
| June 6 | To Advance against Sale | 50,000 | June 21 | By Cash | C | 5,000 | |||
| June 20 | To A. Mukerji | 6,000 | June 29 | By Office Salaries | 4,000 | ||||
| June 21 | To Bank | C | 5,000 | June 30 | By Rent | 1,000 | |||
| June 30 | To Sales | 8,000 | June 30 | By Bank | C | 7,500 | |||
| June 30 | By Balance c/d | 500 | 70,500 | ||||||
| June 30 | To Cash | C | 7,500 | ||||||
| 15,000 | 89,000 | 15,000 | 89,000 | ||||||
| July 1 | To Balance b/d | 500 | 70,500 |
9. Solution
Double Column Cash Book of Raj & Co.
| Date | Particulars | L.F. | Cash (₹) | Bank (₹) | Date | Particulars | L.F. | Cash (₹) | Bank (₹) |
|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2020 | ||||||||
| March 1 | To Balance b/d | 2,00,000 | March 1 | By Balance b/d | 48,00,000 | ||||
| March 2 | To Capital | 48,00,000 | March 5 | By Bank | C | 32,00,000 | |||
| March 5 | To Cash | C | 32,00,000 | March 12 | By Girdhari Lal | 4,80,000 | |||
| March 8 | To Rahul | 3,56,000 | March 15 | By Purchases | 2,80,000 | ||||
| March 17 | To Sales | 4,00,000 | March 18 | By Furniture | 6,00,000 | ||||
| March 19 | To Sohail | 92,000 | March 22 | By Commission | 60,000 | ||||
| March 29 | To Dividend | 12,000 | March 25 | By Drawings | 1,20,000 | ||||
| March 31 | To Balance c/d | 24,36,000 | March 26 | By Khanna | 2,80,000 | ||||
| March 27 | By Drawings | 1,20,000 | |||||||
| March 30 | By Electricity | 20,000 | |||||||
| March 31 | By Salary | 1,40,000 | |||||||
| March 31 | By Rent | 80,000 | |||||||
| March 31 | By Wages | 60,000 | |||||||
| March 31 | By Balance c/d | 12,56,000 | |||||||
| 57,56,000 | 57,40,000 | 57,56,000 | 57,40,000 | ||||||
| April 1 | To Balance b/d | 12,56,000 | April 1 | By Balance b/d | 24,36,000 |
10. Solution
Petty Cash Book on Imprest System
| Receipts | Date | Particulars | V.No. | Total Payments | Stationery | Postage & Telegrams | Conveyance | Cartage | Sundry Expenses |
|---|---|---|---|---|---|---|---|---|---|
| ₹ 1,500 | July 1 | To Cash A/C | |||||||
| July 3 | By Purchased Stationery A/C | ₹ 100 | ₹ 100 | ||||||
| July 6 | By Paid for Telegram A/C | ₹ 30 | ₹ 30 | ||||||
| July 6 | By Paid for Charity A/C | ₹ 50 | ₹ 50 | ||||||
| July 7 | By Purchased Soap A/C | ₹ 55 | ₹ 55 | ||||||
| July 7 | By Paid for Newspaper Bill A/C | ₹ 185 | ₹ 185 | ||||||
| July 9 | By Paid Taxi Fare A/C | ₹ 85 | ₹ 85 | ||||||
| July 9 | By Paid Coolie A/C | ₹ 15 | ₹ 15 | ||||||
| July 12 | By Paid Postal Expenses A/C | ₹ 70 | ₹ 70 | ||||||
| July 14 | By Paid Auto Fare A/C | ₹ 55 | ₹ 55 | ||||||
| July 14 | By Paid for Courier Services A/C | ₹ 35 | ₹ 35 | ||||||
| July 25 | By Speed Post Charges A/C | ₹ 84 | ₹ 84 | ||||||
| July 25 | By Telegram Charges A/C | ₹ 46 | ₹ 46 | ||||||
| July 26 | By Paid Carriage A/C | ₹ 43 | ₹ 43 | ||||||
| July 27 | By Refreshment Expenses A/C | ₹ 87 | ₹ 87 | ||||||
| July 27 | By Photostating Charges A/C | ₹ 70 | ₹ 70 | ||||||
| July 28 | By Pen/Pencils A/C | ₹ 155 | ₹ 155 | ||||||
| July 29 | By STD Call Charges A/C | ₹ 95 | ₹ 95 | ||||||
| July 31 | By Loading Charges A/C | ₹ 80 | ₹ 80 | ||||||
| ₹ 1,340 | ₹ 255 | ₹ 360 | ₹ 140 | ₹ 138 | ₹ 392 | ||||
| July 31 | By Balance c/d | ₹ 160 | |||||||
| ₹ 1,500 | ₹ 1,500 | ||||||||
| ₹ 160 | Aug 1 | To Balance b/d | |||||||
| ₹ 1,340 | Aug 1 | To Cash A/C |
11. Solution
Petty Cash Book for Sh. Sahil
| Receipts | Date | Particulars | V.No. | Total Payments | Postage & Telegrams | Conveyance | Stationery | Repairs | Sundry Expenses |
|---|---|---|---|---|---|---|---|---|---|
| ₹ 490 | May 1 | To Cash | |||||||
| May 1 | By Purchased Stamps | ₹ 50 | ₹ 50 | ||||||
| May 1 | By Paid for Carriage | ₹ 20 | ₹ 20 | ||||||
| May 3 | By Paid for Office Cleaning | ₹ 10 | ₹ 10 | ||||||
| May 3 | By Paid Telegram to S. Singh | ₹ 20 | ₹ 20 | ||||||
| May 3 | By Paid Railway Fare | ₹ 30 | ₹ 30 | ||||||
| May 3 | By Paid Bus Fare | ₹ 30 | ₹ 30 | ||||||
| May 8 | By Paid Telephone Calls | ₹ 20 | ₹ 20 | ||||||
| May 8 | By Tea to Office Staff | ₹ 20 | ₹ 20 | ||||||
| May 10 | By Paid Reward to Servants | ₹ 10 | ₹ 10 | ||||||
| May 10 | By Shorthand Notebooks | ₹ 50 | ₹ 50 | ||||||
| May 10 | By Paid Wages to Casual Labor | ₹ 30 | ₹ 30 | ||||||
| May 12 | By Purchased Pens & Pencils | ₹ 40 | ₹ 40 | ||||||
| May 12 | By Paid for Envelopes | ₹ 20 | ₹ 20 | ||||||
| May 15 | By Repairs to Typewriter | ₹ 10 | ₹ 10 | ||||||
| ₹ 360 | ₹ 70 | ₹ 60 | ₹ 110 | ₹ 10 | ₹ 110 | ||||
| May 15 | By Balance c/d | ₹ 130 | |||||||
| ₹ 490 | ₹ 490 | ₹ 70 | ₹ 60 | ₹ 110 | ₹ 10 | ₹ 110 | |||
| ₹ 130 | May 16 | To Balance b/d | |||||||
| ₹ 360 | May 16 | To Cash |
12. Solution
Petty Cash Book
| Receipts | Date | Particulars | V.No. | Total Payments | Postage & Telegrams | Conveyance | Cartage | Stationery | Repairs | Refreshments | Sundry Expenses |
|---|---|---|---|---|---|---|---|---|---|---|---|
| ₹ 2,500 | Jan 1 | To Cash (Imprest Amount) | |||||||||
| Jan 1 | By Paid Cartage | ₹ 60 | ₹ 60 | ||||||||
| Jan 2 | By STD Charges | ₹ 50 | ₹ 50 | ||||||||
| Jan 2 | By Bus Fare | ₹ 25 | ₹ 25 | ||||||||
| Jan 3 | By Postage | ₹ 35 | ₹ 35 | ||||||||
| Jan 4 | By Refreshment for Employees | ₹ 86 | ₹ 86 | ||||||||
| Jan 6 | By Courier Charges | ₹ 35 | ₹ 35 | ||||||||
| Jan 8 | By Refreshment of Customer | ₹ 54 | ₹ 54 | ||||||||
| Jan 10 | By Cartage | ₹ 32 | ₹ 32 | ||||||||
| Jan 15 | By Taxi Fare to Manager | ₹ 78 | ₹ 78 | ||||||||
| Jan 18 | By Stationery | ₹ 75 | ₹ 75 | ||||||||
| Jan 20 | By Bus Fare | ₹ 20 | ₹ 20 | ||||||||
| Jan 22 | By Fax Charges | ₹ 40 | ₹ 40 | ||||||||
| Jan 25 | By Telegram Charges | ₹ 40 | ₹ 40 | ||||||||
| Jan 27 | By Postage Stamps | ₹ 250 | ₹ 250 | ||||||||
| Jan 29 | By Repair of Furniture | ₹ 120 | ₹ 120 | ||||||||
| Jan 30 | By Laundry Expenses | ₹ 150 | ₹ 150 | ||||||||
| Jan 31 | By Miscellaneous Expenses | ₹ 160 | ₹ 160 | ||||||||
| ₹ 1,310 | ₹ 365 | ₹ 123 | ₹ 92 | ₹ 75 | ₹ 120 | ₹ 140 | ₹ 395 | ||||
| Jan 31 | By Balance c/d | ₹ 1,190 | |||||||||
| ₹ 2,500 | ₹ 1,310 | ₹ 365 | ₹ 123 | ₹ 92 | ₹ 75 | ₹ 120 | ₹ 140 | ₹ 395 | |||
| ₹ 1,190 | Feb 1 | To Balance b/d | |||||||||
| ₹ 1,310 | Feb 1 | To Cash |
Extras
Additional questions and answers
1. Define Cash Book?
Answer : A Cash Book is a record that documents all money transactions involving coins, notes, and cheques.
Q. What is the simplest form of the Cash Book called?
Answer : The simplest form of the Cash Book is called a “Single Column Cash Book.”
Q. What are the sides of a Cash Book known as?
Answer : The sides of a Cash Book are known as the debit side and the credit side.
Q. What is a voucher number?
Answer : A voucher number is a unique identifier assigned to each financial transaction for reference and tracking purposes.
Q. What is Ledger Folio (L.F.)?
Answer : Ledger Folio (L.F.) is the column in the Cash Book where the page number of the Ledger, where the amount is posted, is recorded.
Q. Define Contra entry.
Answer : Contra entry refers to transactions that affect both the ‘Cash Column’ and the ‘Bank Column’ of the Cash Book, such as cash deposited into the bank or cash withdrawn from the bank for office use. These entries are recorded on both sides of the Cash Book, and their double entry is complete within the Cash Book itself.
Q. Define Petty Cash Book.
Answer : Petty Cash Book is the book used for recording expenses involving small amounts. Besides petty expenses, receipts from the main cash are also recorded in it.
Q. Name two types of Petty Cash Books.
Answer : The two types of Petty Cash Books are: (i) Simple Petty Cash Book (ii) Analytical Petty Cash Book
Q. Define Petty Cashier?
Answer : A Petty Cashier is a person appointed by a business to make small payments, say below ₹ 500, and maintain the Petty Cash Book for recording these transactions.
Q. What is an imprest amount?
Answer : An imprest amount is a fixed sum of money estimated to meet various petty expenses for a specific period, such as a week, a fortnight, or a month, which is given to the Petty Cashier at the beginning of the period.
Q. What do you mean by bank overdraft?
Answer : A bank overdraft occurs when a bank allows a firm to withdraw more than the amount deposited, resulting in a credit balance in the bank column of the cash book.
Q. Explain the meaning of Cash Book.
Answer : Cash Book is a book of prime entry in which all transactions relating to cash receipts and cash payments are recorded in a chronological order, i.e., as they occur. Cash receipts are recorded on the debit side of the Cash Book and cash payments on the credit side. A balance is struck by deducting total cash payments from total cash receipts to determine the cash in hand. According to Andrew Munro, “Cash book is used for recording the receipts and payments of money, whether in coins, notes, cheques, postal orders, bank drafts, etc.”
Q. What is the necessity of a Cash Book?
Answer : Cash transactions in a firm are generally numerous, and it is quite impracticable and inconvenient to record all cash transactions in the Journal. It is, therefore, necessary to maintain a separate book for cash transactions. This book enables a businessman to know the balance of cash in hand and at bank at any point of time.
Q. What are the features of a Cash Book?
Answer : The features of a Cash Book are:
- Only cash and bank transactions are recorded in the Cash Book.
- Cash and cheque receipts are recorded on the debit side while cash and cheque payments are recorded on the credit side.
- It records only one aspect of the transaction, i.e., cash and bank; double entry is completed by means of posting in the ledger to the respective account.
- Cash and bank transactions are recorded in the Cash Book in a chronological order, i.e., in the order they take place.
- It performs the role of both the Journal and the Ledger at the same time.
- Unlike any other account or book, cash book is balanced daily.
Q. Describe the Simple Cash Book.
Answer : The Simple Cash Book is the simplest form of Cash Book. A Simple Cash Book or a Single Column Cash Book records only the receipts and payments of cash. Its format is similar to an account, with one amount column on each side. The left-hand side, known as ‘debit’, records receipts of cash, and the right-hand side, known as ‘credit’, records payments. In the column for:
(i) Date: Date, month, and the year of the transaction is written.
(ii) Particulars: The name of the account under which cash has been received or paid is written. In an existing business, Cash Book starts with the Opening Balance of cash written on the receipts side as ‘To Balance b/d’.
(iii) Voucher No. (V.No.): The serial number of the voucher certifying the receipt or payment is written in this column.
(iv) Ledger Folio (L.F.): In the column for ‘Ledger Folio’, the page number of the Ledger, where the amount is posted, is recorded.
(v) Amount: The amount of the transaction is recorded in this column.
Q. What are contra entries and when are they made?
Answer : Contra entries are entries where both the debit and credit aspects of a transaction are recorded in the Cash Book itself. These entries are made when cash is deposited into the bank or when cash is withdrawn from the bank for office use. Such transactions affect both the ‘Cash Column’ and the ‘Bank Column’. For example, when cash is deposited into the bank, it increases the bank balance and reduces the cash balance, and when cash is withdrawn from the bank, it increases the cash balance and reduces the bank balance.
Q. How are cheque payments recorded in the Cash Book?
Answer : When a payment is made by issuing a cheque, it is immediately recorded on the credit side in the Bank Column so that the true balance at the bank can be known.
Q. Explain the procedure for recording a dishonoured cheque.
Answer : If a cheque received from a customer and deposited into the bank for collection is dishonoured, an entry is made on the credit side of the Cash Book by entering the amount of the dishonoured cheque in the bank column. In the particulars column, the name of the customer is entered. For instance, if a cheque for ₹ 2,000 received from Ram Kumar is dishonoured, it will be recorded on the credit side as “By Ram Kumar” and the amount will be entered in the Bank Column.
Q. What is an overdraft and how is it treated in the Cash Book?
Answer : An overdraft occurs when the bank allows the firm to withdraw more than the amount deposited. In such a case, the total of the bank column on the credit side will be bigger than the total on the debit side. The difference is written on the debit side as ‘To Balance c/d’. Then the totals are written on the two sides opposite to one another. The balance is then entered on the credit side mentioning ‘By Balance b/d’.
Q. Define cash discount. How is it recorded?
Answer : Cash discount is the amount allowed or received for settling accounts promptly. In a Cash Book having Cash and Bank Columns, the amount of discount is recorded in the Journal. For example, ₹4,900 are received from Luke in full settlement of his account of ₹5,000. In such a case, ₹4,900 will be recorded in the Cash Book and the discount of ₹100 will be recorded in the Journal as follows:
Discount Allowed A/c Dr. 100
To Luke 100
(Being discount allowed to Luke in full settlement). Similarly, discount received by us is also recorded in the Journal.
Q. Explain what is meant by the endorsement of a cheque.
Answer : Endorsement of a cheque means that a cheque received from a customer is not deposited into the bank but is endorsed to some other person, i.e., the endorsee. The receipt as well as endorsement of the cheque is recorded through the Journal and not the Cash Book because receipt and endorsement of the cheque neither affects Cash nor Bank account. For example, a cheque for ₹25,000 is received from Manav on 3rd March, 2021 and it is endorsed to Vinod on 6th March, 2021. In this case, two Journal entries are passed, one for receiving the cheque from Manav and another for endorsing the cheque to Vinod.
Q. Explain the features of a Simple Cash Book.
Answer : The features of a Simple Cash Book are:
(i) Only cash receipts and payments are recorded in it.
(ii) It records one aspect of the transaction, i.e., cash or bank, while double entry is completed by means of posting in the ledger to the respective account.
(iii) Cash and bank transactions are recorded in chronological order, i.e., as they occur.
(iv) It performs the role of both the Journal and the Ledger at the same time. (v) Unlike any other account or book, the cash book is balanced daily.
Q. Describe the balancing process of the Simple Cash Book.
Answer : The balancing process of the Simple Cash Book involves striking a balance by deducting total cash payments from total cash receipts to determine the cash in hand. The closing balance makes the totals of the two sides equal and is written in the two columns opposite one another. The closing balance becomes the opening balance of cash in hand at the beginning of the next period and is written on the debit side as ‘To Balance b/d’. The debit side will always be bigger or equal to the credit side since payments cannot exceed available cash. The total of the debit side of the Cash Book always exceeds the credit side because no one can pay more cash than the actual amount in hand.
Q. Discuss the different columns found in a Double Column Cash Book.
Answer : The different columns found in a Double Column Cash Book include:
(i) Cash and Bank Columns: These represent the Cash Account and Bank Account respectively, eliminating the need to open separate accounts in the Ledger.
(ii) Contra Entries: These are entries where both the Cash Column and Bank Column are affected, such as when cash is deposited into the bank or withdrawn from the bank for office use.
(iii) Receipt of Cheque and Bank Draft: Transactions involving cheques received and deposited into the bank are entered in the Bank Column on the debit side.
(iv) Payment by Cheque: Payments made by issuing a cheque are recorded immediately on the credit side in the Bank Column.
(v) Dishonour of a Cheque: Dishonoured cheques are recorded on the credit side of the Cash Book in the Bank Column.
(vi) Cash Discount: While the amount of discount is not recorded in the Cash Book itself, it is recorded in the Journal.
Q. How is a Petty Cash Book balanced at the end of a specified period?
Answer : At the end of a specified period, the total payments column and individual expenses columns are totaled in the Petty Cash Book. It is ascertained that the total of the various expenses columns, including the sundries column, equals the total of the payments column. The total payments column is compared with the total receipts column to determine the balance. The closing balance is shown as ‘By Balance c/d’ and is carried forward at the beginning of the next period as ‘To Balance b/d’.
Q. Explain the analytical petty cash book. Mention its purpose.
Answer : An Analytical Petty Cash Book is the best way of recording various petty cash payments under separate columns for suitable heads of expenditure. The number of columns depends on the nature and requirements of the trade. Its purpose is to facilitate the posting of expenses from the totals of the various columns to the respective accounts in the ledger. This book is called an Analytical Petty Cash Book because it provides a separate column for each head of expense, and those expenses not entered in any specific column are recorded in a column titled ‘Sundry Expenses’. When a petty expense is recorded in the total payment column, the same amount is also recorded in the appropriate expense column.
Q. Discuss the advantages of the Imprest System of Petty Cash Book.
Answer : The advantages of the Imprest System of Petty Cash Book are:
(i) It saves the time of the chief cashier since petty expenses are recorded in the petty cash book.
(ii) Every petty expense must be supported by vouchers duly attested, minimizing the chances of fraud.
(iii) It helps check whether the amount advanced as imprest is sufficient to meet petty expenses.
(iv) Petty expenses are kept within the limits of the imprest since the petty cashier cannot spend more than the available petty cash.
Q. Explain how the imprest system helps in controlling petty expenses.
Answer : The imprest system helps in controlling petty expenses as every petty expense is required to be supported by vouchers duly attested, minimizing chances of frauds. Additionally, it ensures that petty expenses are kept within the limits of the imprest since the petty cashier cannot spend more than the available petty cash. It also gives an idea to check whether the amount advanced as imprest is sufficient to meet petty expenses.
Q. Discuss the procedure for recording a dishonoured cheque in the Cash Book.
Answer : When a cheque received from a customer and deposited into the bank for collection is dishonoured, an entry is made on the credit side of the Cash Book by entering the amount of the dishonoured cheque in the bank column. In the particulars column, the name of the customer is entered. For example, if a cheque for ₹2,000 received from Ram Kumar is dishonoured, it will be recorded on the credit side as “By Ram Kumar,” and the amount will be entered in the Bank Column.
Q. Explain the transactions that are recorded as contra entries with examples.
Answer : Contra entries are transactions where both the debit and credit aspects are recorded in the Cash Book itself. Examples of such transactions include:
(i) Cash deposited into the bank, which increases the bank balance and reduces the cash balance. For instance, if ₹3,000 is deposited into the bank, it is recorded in the Cash Book as follows: On the debit side, “To Cash A/c” is entered in the particulars column and the amount is entered in the bank column. On the credit side, “By Bank A/c” is entered in the particulars column and the amount is entered in the cash column.
(ii) Cash withdrawn from the bank for office use, which increases the cash balance and reduces the bank balance. For example, if ₹4,000 is withdrawn from the bank, it is recorded in the Cash Book as follows: On the debit side, “To Bank A/c” is entered in the particulars column and the amount is entered in the cash column. On the credit side, “By Cash A/c” is entered in the particulars column and the amount is entered in the bank column.
Q. What is the Petty Cash Book? Explain its types and features.
Answer : The Petty Cash Book is the book used for recording expenses involving small amounts, besides receipts from main cash. The person maintaining this book is called the ‘petty cashier’.
There are two types of Petty Cash Books:
- Simple Petty Cash Book
- Analytical Petty Cash Book
Features of the Petty Cash Book include:
- It is used to record petty expenses or small payments such as conveyance, stationery, cartage, etc.
- A separate column is provided for each head of expense in the Analytical Petty Cash Book.
- Those expenses that do not fall under any specific head are entered in a column titled ‘Sundry Expenses’.
- At the end of a specified period, the total of the analysis (expenses) columns is added and posted to the debit side of the respective accounts.
Q. What is the imprest system? Explain its advantages in detail.
Answer : The imprest system is a method under which the amount required to meet various petty expenses is estimated for a certain period, such as a week, fortnight, or month. This amount, known as the ‘imprest amount’, is given to the Petty Cashier at the beginning of the period. The Petty Cashier uses this amount to pay petty expenses and records them in the Petty Cash Book. At the end of the period, the Petty Cashier submits vouchers to the head cashier, who reimburses the amount spent, ensuring the fixed imprest amount is restored at the start of the next period.
Advantages of the Imprest System are:
(i) The time of the chief cashier is saved when petty expenses are recorded in the Petty Cash Book.
(ii) Every petty expense is supported by vouchers duly attested, minimizing chances of fraud.
(iii) It helps to check whether the amount advanced as imprest is sufficient to meet petty expenses.
(iv) Petty expenses are kept within the limits of the imprest since the Petty Cashier cannot spend more than the available petty cash.
Q. Describe the process of preparing a Simple Petty Cash Book with an example.
Answer : A Simple Petty Cash Book is identical to a Cash Book. Amounts received from the head cashier are recorded on the debit side, while payments are recorded on the credit side. The date and particulars of every transaction are written in the same date and particulars column.
For example, if ₹5,000 is received from the Chief Cashier for Petty Cash, the entry would be recorded on the debit side. Payments made, such as ₹100 for postage stamps, ₹100 for bus fare, ₹2,000 for stationery, ₹500 for milk and sugar, and ₹60 for window cleaning, would be recorded on the credit side.
At the end of the period, the total payments column is balanced with the receipts column, and the closing balance is carried forward to the next period.
Q. Explain how bank transactions are handled in the Double Column Cash Book.
Answer : In the Double Column Cash Book, bank transactions are recorded in the Bank Column. For example:
- When cash is deposited into the bank, it increases the bank balance and reduces the cash balance. This affects both the Cash Column and the Bank Column. The entry is recorded as ‘To Cash A/c’ on the debit side in the Bank Column and ‘By Bank A/c’ on the credit side in the Cash Column.
- When cash is withdrawn from the bank for office use, it increases the cash balance and reduces the bank balance. The entry is recorded as ‘To Bank A/c’ on the debit side in the Cash Column and ‘By Cash A/c’ on the credit side in the Bank Column.
Contra entries, which involve both cash and bank columns, are denoted by writing the letter ‘C’ in the L.F. column on both sides of the cash book.
35. What is Analytical Petty Cash Book? Discuss its features and advantages.
Answer : The Analytical Petty Cash Book is the best way of recording various petty cash payments in separate columns under suitable heads of expenditure. The number of columns depends on the nature and requirements of a particular trade.
Features of the Analytical Petty Cash Book include:
- Separate columns are provided for each head of expense, such as Conveyance, Cartage, Stationery, Postage, Wages, and Sundry Expenses.
- Those expenses that are not entered in any specific column are entered in the ‘Sundry Expenses’ column.
- At the end of the period, the totals of the analysis (expenses) columns are added and posted to the debit side of the respective accounts.
Advantages of the Analytical Petty Cash Book are:
- It facilitates the posting of expenses from the totals of the various columns to the respective accounts in the ledger.
- It ensures systematic recording of all petty expenses under appropriate heads.
Additional MCQs
1. What is a Cash Book?
A. Book of prime entry
B. Ledger account
C. Journal record
D. Memorandum book
Answer: A. Book of prime entry
Q. Why is a separate Cash Book maintained in a business?
A. To record credit transactions
B. To record non-cash transactions
C. To record numerous cash transactions
D. To record inventory details
Answer: C. To record numerous cash transactions
Q. Which of the following is a feature of a Cash Book?
A. Records only ledger entries
B. Serves as both Journal and Ledger
C. Records credit transactions only
D. Requires no balancing
Answer: B. Serves as both Journal and Ledger
Q. How frequently is the Cash Book generally balanced?
A. Daily
B. Weekly
C. Monthly
D. Yearly
Answer: A. Daily
Q. Which transactions are not recorded in a Simple (Single Column) Cash Book?
A. Cash receipts
B. Cash payments
C. Cheque transactions
D. Contra entries
Answer: C. Cheque transactions
Q. What columns are included in the format of a Simple Cash Book?
A. Date, Particulars, Amount
B. Date, Particulars, Voucher No., Ledger Folio, Amount
C. Date, Description, Amount
D. Date, Account, Amount
Answer: B. Date, Particulars, Voucher No., Ledger Folio, Amount
Q. On which side is the opening balance recorded in a Simple Cash Book?
A. Credit side as “By Balance b/d”
B. Debit side as “To Balance b/d”
C. Either side
D. Not recorded
Answer: B. Debit side as “To Balance b/d”
Q. In a Simple Cash Book, where is the closing balance normally recorded?
A. Debit side as “To Balance c/d”
B. Credit side as “By Balance c/d”
C. Debit side as “By Balance b/d”
D. Not recorded
Answer: B. Credit side as “By Balance c/d”
Q. What is meant by a contra entry in the context of a Cash Book?
A. An entry affecting only the cash column
B. An entry affecting only the bank column
C. An entry affecting both cash and bank columns
D. An entry recorded in the Journal
Answer: C. An entry affecting both cash and bank columns
Q. When cash is deposited into the bank in a Double Column Cash Book, how is the transaction recorded?
A. Debit in bank column; credit in cash column
B. Credit in bank column; debit in cash column
C. Debit in both columns
D. Credit in both columns
Answer: A. Debit in bank column; credit in cash column
Q. Which letter is used in the Ledger Folio column to denote contra entries?
A. L
B. X
C. C
D. P
Answer: C. C
Q. If a cheque is received but not deposited on the same day, where is it recorded?
A. In the Cash Book
B. In the Ledger
C. In the Journal
D. It is not recorded
Answer: C. In the Journal
Q. How is a dishonoured cheque recorded in the Cash Book?
A. On the debit side of the bank column
B. On the credit side of the bank column
C. On the debit side of the cash column
D. Not recorded at all
Answer: B. On the credit side of the bank column
Q. Where is the amount of a cash discount recorded when using a Double Column Cash Book?
A. In the Cash Book
B. In the Ledger
C. In the Journal
D. In the Petty Cash Book
Answer: C. In the Journal
Q. In the Imprest system of a Petty Cash Book, what happens at the end of the period?
A. The imprest amount is increased
B. The amount spent is reimbursed to restore the fixed imprest
C. The remaining balance is carried over without change
D. The petty cash is closed
Answer: B. The amount spent is reimbursed to restore the fixed imprest
Q. What is the main purpose of maintaining a Petty Cash Book?
A. To record large transactions
B. To record bank transfers
C. To record small cash expenses
D. To record credit sales
Answer: C. To record small cash expenses
Q. Which type of Petty Cash Book provides separate columns for various expense heads?
A. Simple Petty Cash Book
B. Analytical Petty Cash Book
C. Double Column Petty Cash Book
D. Imprest Cash Book
Answer: B. Analytical Petty Cash Book
Q. In the Cash Book, which side records cash receipts?
A. Credit side
B. Debit side
C. Both sides
D. Neither side
Answer: B. Debit side
Q. In the Cash Book, what is recorded on the credit side?
A. Cash receipts
B. Cash payments
C. Both cash receipts and payments
D. Only contra entries
Answer: B. Cash payments
Q. Which of the following is not recorded in the Cash Book?
A. Cash receipts
B. Cash payments
C. Cash discount allowed
D. Contra entries
Answer: C. Cash discount allowed
Q. What does the Cash Book represent?
A. The true position of bank transactions
B. The true position of cash transactions
C. Only the journal entries
D. Only the ledger postings
Answer: B. The true position of cash transactions
Q. Who typically maintains the Petty Cash Book?
A. Chief accountant
B. Petty cashier
C. Manager
D. Office clerk
Answer: B. Petty cashier
Q. What is recorded in the Ledger Folio (L.F.) column of the Cash Book?
A. Transaction amounts
B. Voucher serial numbers
C. Page number of the Ledger
D. Expense categories
Answer: C. Page number of the Ledger
Q. Which system of the Petty Cash Book involves providing an advance that is not fixed?
A. Imprest System
B. Ordinary System
C. Analytical System
D. Contra System
Answer: B. Ordinary System
Q. In a Double Column Cash Book, if an overdraft occurs in the bank column, how is the closing balance shown?
A. On the credit side as “By Balance c/d”
B. On the debit side as “To Balance c/d”
C. On the debit side as “By Balance b/d”
D. Not shown in the Cash Book
Answer: B. On the debit side as “To Balance c/d”
Q. Which of the following transactions is recorded in a Simple Cash Book?
A. Credit sales
B. Cheque receipts
C. Cash payments
D. Bank drafts
Answer: C. Cash payments
Q. In a typical example of a Simple Cash Book, which transaction is not recorded?
A. Commencement of business with cash
B. Purchase of goods for cash
C. Sale of goods on credit
D. Payment of salaries in cash
Answer: C. Sale of goods on credit
Q. What is the effect of a cash receipt entry in the Cash Book?
A. It decreases the cash balance
B. It increases the cash balance
C. It has no effect on the cash balance
D. It decreases the bank balance
Answer: B. It increases the cash balance
Q. The Cash Book is classified as what type of account?
A. Nominal account
B. Personal account
C. Real account
D. Contra account
Answer: C. Real account
Q. Which of the following does not affect the Cash Book?
A. Cash sales
B. Payment by cheque
C. Endorsement of a cheque
D. Cash purchase
Answer: C. Endorsement of a cheque
Q. When a cheque is received and deposited on the same day in a Double Column Cash Book, in which column is it recorded?
A. Cash column only
B. Bank column only
C. Both cash and bank columns
D. It is recorded in the Journal
Answer: B. Bank column only
Q. Which system of the Petty Cash Book involves a fixed amount that is replenished at the end of the period?
A. Ordinary System
B. Imprest System
C. Analytical System
D. Simple System
Answer: B. Imprest System
Q. According to Andrew Munro, which forms of money are recorded in the Cash Book?
A. Only cash and coins
B. Coins, notes, cheques, postal orders, bank drafts
C. Only bank drafts and cheques
D. Only credit transactions
Answer: B. Coins, notes, cheques, postal orders, bank drafts
Q. The Cash Book is best described as a ______.
A. Journal
B. Subsidiary book
C. Master ledger
D. Control account
Answer: B. Subsidiary book
34. What is recorded in the “V.No.” column of the Cash Book?
A. Transaction amount
B. Voucher serial number
C. Ledger page number
D. Date of transaction
Answer: B. Voucher serial number
Practical solution Q.8