FINANCIAL ACCOUNT
Chapter-10 Special Purpose Books I-Cash Book
Multiple choice question (MCQ)
(i) which of the following correctly complete the sentences given below
(a) Cash receipts and payments.
(b) Cash and credit translations.
(c) Cash receipts.
(d) Cash payment.
Ans.(a) Cash receipts and payments.
(ii) Ram has sold goods for cash to Param, the entry will be recorded in the
(a) Cash book.
(b) Sales book.
(c) General proper.
(d) Petty cash book.
Ans.(a) Cash book.
(iii) Ravi has purchased Goods for cash for rupees 10,000. It will be recorded in
(a) Cash book.
(b)General book.
(c)Both cash books and general books.
(d)Petty cash book.
Ans.(a) Cash book.
(iv) Mohit paid rupees 9,800 in settlement Off his account of rupees 10000. Discount Allowed will be recorded in
(a)Cash Book.
(b)Journal Book.
(c)Both Cash Book and Journal.
(d)Petty Cash Book.
Ans.(b) Journal Book.
(v) Deposit of cash in bank is recorded in
(a)Debit of Bank Column and Credit of Cash Column.
(b)Debit of Cash Column and Credit of Bank Column.
(c)Debit of Cash Column and also Credit of Cash Column.
(d)Debit of Bank Column and also Credit of Bank Column.
Ans.(a) Debit of Bank Column and Credit of Cash Column.
(vi) Withdrawal of cash from bank is recorded in
(a)Debit of Bank Column and Credit of Cash Column.
(b)Debit of Cash Column and Credit of Bank Column.
(c)Debit of Cash Column and also Credit of Cash Column.
(d)Debit of Bank Column and also Credit of Bank Column.
Ans.(b) Debit of Cash Column and Credit of Bank Column.
(vii) Balance in the petty cash book is
(a)An expense.
(b)A Profit.
(c)An asset.
(d)Income.
Ans.b(c) An asset.
(viii) When a firm maintains two column cash book it does not maintain
(a)Purchase books.
(b)General proper.
(c)Sales book.
(d)Bank and cash account in the ledger.
Ans.(d) Bank and cash account in the ledger.
(ix) Which of the following is not recorded in the cash book
(a)Credit sales.
(b)Cash receipts.
(c)Cash payments.
(d)Opening cash balance.
Ans.(a) Credit sales.
(x) Contra entries on the debt side of the cash book are posted to
(a)Debit of bank account in the ledger.
(b)Debit of cash account in the ledger.
(c)Credit of cash account in the ledger.
(d)Not posted in the ledger.
Ans.(d) Not posted in the ledger.
(xi) Which of the following is both of the general and ledger
(a)Cash book.
(b)General journal.
(c)Purchases journal.
(d)Sales journal.
Ans.(a) Cash book.
(xii) Debit balance of rupees 10,000 in the cash column of the cash book shows that
(a)Rupees 10,000 has been paid.
(b)Rupees 10,000 is owing.
(c)The amount received exceeds the amount paid by rupees 10,000.
(d)Rupees 10,000 has been credited into the bank account.
Ans. (c)The amount received exceeds the amount paid by rupees 10,000.
(xiii) Simple petty cash book is like a
(a)Cash book.
(b)Statement.
(c)Journal.
(d)None of these.
Ans. (b) Statement.
Very Short Answer Type Questions:-
Q.1. What is a Cash Book?
Ans. Cash Book is a Subsidiary Book in which all cash transactions, receipts and payments are recorded.
Q.2. What kind of transactions are recorded in the Cash Book?
Ans. Cash and bank transactions are recorded.
Q.3. Name the types of Cash Book?
Ans. Simple or Single Column Cash Book and Two-column Cash Book with Cash and Bank Columns.
Q.4. What is meant by Simple Cash Book?
Ans. Simple Cash Book is a Cash Book with one column on each side to record only cash transactions.
Q.5. What is meant by Two-column Cash Book?
Ans. Two-column Cash Book is the Cash Book which has two columns on each side, one column each to record cash transactions and second column each to record bank transactions.
Q.6. Cash column of the Cash Book will always have a debit balance or at the most nil balance. Why?
Ans. It is so because cash payments cannot be more than the cash in hand.
Q.7. Bank column of the Cash Book can have either debit balance or credit balance. Why?
Ans. Bank column in the Cash Book can represents Bank Account.Bank Account will have a credit balance if it is overdrawn and will otherwise have a debit balance.
Q.8. What is Contra Entry?
Ans. Contra Entry means withdrawal of of cash from bank for official use or cash deposited in the bank. As both the accounts are in the Cash Book it is signified by writing 'C' in the column for Ledger Folio.
Q.9. Define Bank overdraft.
Ans. Bank overdraft is the drawing out of a bank Account of more than what has been deposited in it.
Q.10. Which balance in the bank in the Cash Book signifies bank overdraft?
Ans. Credit Balance in the bank column of the Cash Book signifies bank overdraft.
Q.11. To which side of the Ledger Account are the transactions on the receipts side of the Cash Book posted?
Ans. They are posted on the credit side of the credit side of the Ledger Account.
Q.12. To which side of the Ledger Account are the transactions on the payments side of the Cash Book posted?
Ans. They are posted on the debit side of the Ledger Account.
Q.13. Briefly explain the Petty Cash Book.
Ans. Petty Cash Book is the Cash Book in which expenses involving small amount are recorded.
Q.14. Name two types of Petty Cash Book.
Ans. Simple Petty Cash Book and Analytical Petty Cash Book.
Q.15. State any one advantage of maintaining the Petty Cash Book.
Ans. It saves the time of Chief Cashier.
Q.16. What is meant by Analytical Petty Cash Book?
Ans. Analytical Petty Cash Book has two sides, left side is used to the receipts of cash and the right side is used for recording the payments. The payments side has columns for recording each type of expense.
Higher Order Thinking Skills (HOTS) Questions:-
Q.1. A Rs. 10,000 debit balance brought down in the Cash Book of a firm means that the firm has Rs. 10,000 Cash in Hand. Do you agree?
Ans. Yes. Debit balance of Cash Book brought down is an asset of the firm. It means the firm has cash balance of Rs. 10,000 in hand.
Q.2. Cash column in the Cash Book cannot have a negative balance, i.e., payments cannot be more than cash balance in hand. Why?
Ans. Yes. cash column in the Cash Book cannot have a negative balance. It is so because the firm cannot pay more than available cash.
Q.3. Why is only one account posted to the Ledger Account from the Cash Book?
Ans. Although the Cash Book is a book of original entry, it is also a book where the Cash Account and Bank Account are maintained. In effect, it is both a book of original entry and a Ledger dedicated to those accounts. As a result, each transaction in the Cash Book is posted only once to another account.
Q.4. Roman, an employee of Jumbo Electronics, deposited in the bank Rs. 40,000 as the previous day's sale held overnight in the firm's safe. He has recorded the transaction in the Cash Book as follows:
In the bank column on Payments side; and in the cash column on Receipts side. Has he passed the entry correctly?
Ans.The entry recorded in the books of account is not correct. A deposit into the bank is recorded on the Receipts side of the Cash Book in the bank column and cash deposited is payment, it is recorded on the Payments side of the Cash Book in the cash column.
Q.5. Bank overdraft is a Liability while bank balance is an Asset. Do you agree?
Ans. Yes. Bank overdraft is the amount payable by the firm to the bank since the amount drawn is more than the balance held. Bank balance is the amount owned by the firm that is lying deposited in the bank, thus, it is an asset.
Q.6. It is balance of Petty Cash Book an asset or income?
Ans. Balance of Petty Cash Book is an asset for the firm.
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