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Question-1

Briefly state how the cash book is both journal and a ledger.

Solution:
Cash book is a book in which all transactions relating to cash receipts and cash payments are recorded. It starts with the cash or bank balances at the beginning of the period. Generally, it is made on monthly basis. This is a very popular book and is maintained by all organisations, big or small, profit or not-for-profit. It serves the purpose of both journal as well as the ledger (cash) account. It is also called the book of original entry. When a cashbook is maintained, transactions of cash are not recorded in the journal, and no separate account for cash or bank is required in the ledger. As all the details are entered in the cash book it.

Question-2

What is the purpose of contra entry?

Solution:
When the cash is paid into the bank, cash is withdrawn from the bank for office use; these two transactions are entered on both sides of the cash book. One entry is entered in the cash column and another in the bank column. Both the debit and credit aspect is recorded in the cash book itself, there is no need for ‘Ledger Folio’ column because for the entry in the debit side, the corresponding credit entry appears on the credit side Therefore in the L.F. Column “c” is put indicating ‘contra’, a Latin word which means ‘the other side’.

Question-3

What are special purpose books?

Solution:
Many of the business transactions are repetitive in nature. So in order to avoid cumbersome work and facilitate easy accounting the transactions are easily recorded in special journals, which are used for recording all the transactions of a similar nature. These special journals are also called daybooks or subsidiary books. Special journals are very economical and provide for division of labour in accounting work. The following are some of the special journal books:

 

Cash Book
  Purchases Book
  Purchases Return (Return Outwards) Book
  Sales Book
  Sales Return (Return Inwards) Book
  Journal Proper

 

Question-4

What is petty cash book? How it is prepared?

Solution:
In all organisations, a large number of small payments such as conveyance, cartage, postage, telegrams and other expenses (miscellaneous expenses) are made. These are generally repetitive in nature. If all these payments are handled by the cashier and are recorded in the main cash book, the procedure is found to be very cumbersome. To avoid this petty cashier is appointed to maintain a separate cash book to record these transactions. Such a cash book maintained by petty cashier is called petty cash book.

 

The petty cashier works on the Imprest system. In this system, a definite sum, say Rs. 2,000 is given to the petty cashier at the beginning of a certain period. This amount is called imprest amount. The petty cashier goes on making all small payments out of this imprest amount and when he has spent the substantial portion of the imprest amount say Rs.1, 780, he gets reimbursement of the amount spent from the head cashier. Thus, he again has the full imprest amount in the beginning of the next period. The reimbursement may be made on a weekly, fortnightly or monthly basis, depending on the frequency of small payments.

 

The petty cash book generally has a number of columns for the amount on the payment side (credit) besides the first other amount column. Each of the amount columns is allotted for items of specific payments, which are most common. The last amount column is designated as ‘Miscellaneous’ followed by a ‘Remarks’ column. In the miscellaneous column those payments are recorded for which a separate column does not exist. In the ‘Remarks’ the nature of payment is recorded. At the end of the period, all amount columns are totaled. The total amount column l shows the total amount spent and to be reimbursed. On the receipt (debit) side, there is only one amount column. Columns for the date, voucher number and particulars are common for both receipts and payments.

Question-5

Define the purpose of maintaining subsidiary journal.

Solution:
The transactions of similar nature are recorded in the subsidiary journals. These are also called day books or subsidiary books. Special journals are very economical and provide for division of labour in accounting work. They also facilitate for easy, efficient and quick work.

Question-6

Write the difference between return Inwards and return outwards.

Solution:
Return outwards or purchase returns means, the goods returned to the suppliers by the buyer who purchased on credit. Incase of any default in quality or if it is defective in nature. Whereas, Sales returns or returns inwards means that the goods returned by the customer who originally purchased on credit to the seller of goods.

Question-7

What is cash book? Explain the types of cash book.

Solution:
Cash book is a book in which all transactions relating to cash receipts and cash payments are recorded. It starts with the cash or bank balances at the beginning of the period. It is prepared on monthly basis. This is a very popular book and is maintained by all organisations, big or small, profit or not-for-profit. It serves the purpose of both journal as well as the ledger (cash) account. It is also called the book of original entry. When a cashbook is maintained, transactions of cash are not recorded in the journal, and no separate account for cash or bank is required in the ledger.

 

The different types of cash books are:

 

Single Column Cash book:

The single column cash book records all cash transactions of the business in a chronological order, i.e., it is a complete record of cash receipts and cash payments. When all receipts and payments are made in cash by a business organisation only, the cash book contains only one amount column on each (debit and credit) side. The format of single column cash book is shown below:

Dr.

Cash Book

Cr.

Date

Particulars

L.F.

Amount
Rs.

Date

Particulars

L.F.

Amount
Rs.

               

 

Double column cash book:

 

In double column cash book, there are two columns of amount on each side of the cash book. Now-a-days bank transactions are very large in number. When the number of bank transactions is large; it is convenient to have a separate amount column for bank transactions in the cash book itself instead

of recording them in the journal. This helps in getting information about the position of the bank account from time to time. Just like cash transactions, all payments into the bank are recorded on the left side and all withdrawals/ payments through the bank are recorded on the right side. When cash is deposited in the bank or cash is withdrawn from the bank, both the entries are recorded in the cash book. This is so because both aspects of the transaction appear in the cash book itself. When cash is paid into the bank, the amount deposited is written on the left side in the bank column and at the same time the same amount is entered on the right side in the cash column. The reverse entries are recorded when cash is withdrawn from the bank for use in the office. Against such entries the word C, which stands for contra is written in the L.F. column indicating that these entries are not to be posted to the ledger account. The bank column is balanced in the same way as the cash column.

If the bank debits the firm on account of interest, commission or other charges for bank services, the entry will be made on the credit side in bank column.

If the bank credits the firm’s account, the entry will be made on the debit side of the cash book in the appropriate column. The format of double column cash book is shown below:

Dr.

Cash Book

Cr.

Date

Particulars

L.F.

Cash
Rs.

Bank
Rs.

Date

Particulars

L.F.

Cash
Rs.

Bank
Rs.

                   

 

Question-8


Record the following transactions in double column cash book and balance it.
 
Date 2005 Details

AmountRs.

Aug. 01 Cash balance 15,000
  Bank balance 10,000
Aug. 03 Paid insurance premium by cheque 4,200
Aug. 08 Cash sales 22,000
  Cash discount 750
Aug. 09 Payment for cash purchases 21,000
  Cash discount 700
Aug. 09 Cash deposited in bank 15,000
Aug. 10 Telephone bill paid by cheque 2,300
Aug. 14 Withdrawn from bank for personal use 6,000
Aug. 16 Withdrawn from bank office use 14,500
Aug. 20 Received cheque from John in full and final settlement and deposited the same in the bank 10,700
Aug. 23 Received cash from Michael
Discount allowed
6,850
Aug. 24 Stationery purchased for cash 150
Aug. 25 Cartage paid in cash 1,800
Aug. 25 Cheque received from Kumar 350
Aug. 28 Cheque received from Kumar deposited in Bank 4,500
Aug. 31 Cheque deposited on Aug. 28 dishonoured and returned by the bank 4,500
Aug. 31 Rent paid by cheque 4,000
Aug. 31 Paid wages to the watchman in cash 3,000
Aug. 31 Paid cash for postage 220

 


Solution:

Cash Book

Date

Particulars

L.F.

Cash

Rs.

Bank

Rs.

Date

Particulars

L.F.

Cash

Rs.

Bank

Rs.

2005

Aug

01

08

09

16

20

23

25

28

31

 

 

 

 

 

 

 

 

Sep 01



Balance

b/d

Sales

Cash

Bank

Jhon

Michael

Kumar

Cash

Balance

c/d

 

 

 

 

 

 

Balance b/d

 

 

 



C

C

 

 

 




C

 



15,000

22,000

 

14,500

 

6,850

4,500

 

 

 

 

 

 

 

 

 

 

 

 

_____

62,850
_____

16,980

 

10,000

 

15,000

 

10,700

 

 







4,500

6,000

 

 

 

 

 

 

 

 

_____

40,200
_____

4,700

2005

Aug

03

09

09

10

14

16

24

25

28

31

31

31

31

31

 

Insurance

Purchases

Bank

Telephone expenses

Drawings

Cash

Printing and

Stationery

Cartage

Bank

Kumar

Rent

Wages

Postage

Balance c/d

 

 

 

C

 

 

 


C

 

 

 



C

 



21,000

15,000

 

 

 

 

 

1,800

350

4,500

 

 

3,000

220

 

16,980

 

 

 

_____

62,850
_____



4,200

 

 

 

2,300

6,000

14,500

 

 

 

 

4,500

4,000

 

 

 

4,700

 

 

 

______

40,200
______

 

Question-9


Prepare bank column cash book from the following transactions of M/s Laser Zone for the month of January 2005 and post them to the related ledger accounts:
 
Date Details Amount
Jan.01

 

Cash in hand

Bank overdraft

4,000

3,200

Jan.04 Wage paid   400
Jan.05 Cash sales 7,000
Jan.07 Purchased goods by cheque 2,000
Jan.09 Purchased furniture for cash 2,200
Jan. 11 Cash paid to Rohit 2,000
Jan. 13 Cash sales 4,500
Jan. 14 Deposited into bank 7,000
Jan. 16 Bank charged interest on overdraft   200
Jan. 20 Paid telephone bill by cheque   600
Jan. 25

 

Sale of goods and received cheque (deposited same day) 3,000
Jan. 27 Paid rent    800
Jan. 29 Drew cash for personal use    500
Jan. 30 Paid salary 1,000
Jan. 31 Interest collected by bank 1,700

 


Solution:

Books of Laser Zone

Cash Book

Date

Particulars

L.F.

Cash
Rs.

Bank
Rs.

Date

Particulars

L.F.

Cash
Rs.

Bank
Rs.

2005

Jan

01

05

13

14

25

31

 

 

 

 

 

 

 

 

 

Oct

01

 

Balance

b/d

Sales

Sales

Cash

Sales

Interest

 

 

 

 

 

 

 

 


Balance b/d

 

 

 

 

 

C

 

 

 

 

 

 

4,000

7,000

4,500

 

 

 

 

 

 

 

 

 




_____

15,500
_____

16,00

 

 

 

 

 

7,000

3,000

1,700

 

 

 

 

 




_____

11,700
_____

5,700

2005

Jan

01

04

07

09

11

14

16

20

27

29

30

01

 

 

 

Balance

b/d

Wages

Purchases

Furniture

Rohit

Bank

Overdraft

Interest

Telephone

Rent

Drawings

salary

Balance c/d

 

 

 

 

 

 

 

 

C

 

 

 

 

 

 

 


400

2,200

2,000

7,000

 

 

 




800

500

1,000

1,600

_

_____

15,500
_____

 

 


3,200

 



2,000

 

 

 




200

 



600

 

 

 

5,700

_____

11,700
______

 

Dr.

Wages Account

Cr.

Date

Particulars

J.F.

Amount
Rs.

Date

Particulars

J.F.

Amount
Rs.

2005

Jan 04



Cash
 

400
       
 
Dr.

Sales Account

Cr.

Date

Particulars

J.F.

Amount
Rs.

Date

Particulars

J.F.

Amount
Rs.

        2005

Jan 05

Jan 13

Jan 25

 



Cash

Cash

Bank

 

 



7,000

4,500

3,000

 

Dr.

Purchases Account

Cr.

Date

Particulars

J.F.

Amount
Rs.

Date

Particulars

J.F.

Amount
Rs.

2005

Jan 07



Bank
 

2,000
       
 
Dr.

Furniture Account

Cr.

Date

Particulars

J.F.

Amount
Rs.

Date

Particulars

J.F.

Amount
Rs.

2005

Jan 09



Cash
 

2,200
       
 
Dr.

Rohit Account

Cr.

Date

Particulars

J.F.

Amount
Rs.

Date

Particulars

J.F.

Amount
Rs.

2005

Jan 11



Cash
 

2,000
       
 
Dr.

Overdraft Interest (Paid) Account

Cr.

Date

Particulars

J.F.

Amount
Rs.

Date

Particulars

J.F.

Amount
Rs.

2005

Jan 16



Bank
 

200
       
 
Dr.

Telephone Expenses Account

Cr.

Date

Particulars

J.F.

Amount
Rs.

Date

Particulars

J.F.

Amount
Rs.

2005

Jan 20



Bank
 

600
       
 
Dr.

Rent Account

Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount
Rs.

2005

Jan 27



cash
 

800
       
 
Dr.

Drawings Account

Cr.

Date

Particulars

J.F.

Amount
Rs.

Date

Particulars

J.F.

Amount
Rs.

2005

Jan 29



Cash
 

500
       
 
Dr.

Salary Account

Cr.

Date

Particulars

J.F.

Amount
Rs.

Date

Particulars

J.F.

Amount
Rs.

2005

Jan 30



Cash
 

1000
       
 
Dr.

Interest (Received) Account

Cr.

Date

Particulars

J.F.

Amount
Rs.

Date

Particulars

J.F.

Amount
Rs.

        2005

Jan 31

Bank

 

1,700

 

Question-10


Enter the following transactions of M/s Hi-Life Fashions in purchases and purchases return book and post them to the ledger accounts for the month of September 2005:
 
Date Details
Sept. 01 Purchase of following goods on credit from M/s Ratna Traders, as per Invoice No.714:
25 Shirts @ Rs.300 per shirt
20 Pants @ Rs.700 per pant
Less 10% trade discount
Sept. 08 Purchase of following goods on credit from M/s Bombay Fashion House, as per Invoice No.327 ;
10 Fancy Trousers @ Rs.500 per trouser
20 Fancy Hat @ Rs. 100 per hat
Less 5% trade discount
Sept. 10 Goods returned to M/s Ratana Traders, as per debit note No.102 :3 shirts @ Rs.300 per shirt
1 Pant @ Rs.700 per pant
Less 10% trade discount
Sept. 15 Purchase of following goods on credit from M/s Zolta Fashions, as per Invoice No.6781:
10 Jackets @ Rs.1000 per jacket
5 Plain shirts Rs.200 per shirts
Less 15% trade discount.
Sept. 20 Purchase of following goods on credit from M/s Bride Palace, as per Invoice No.1076:
10 Fancy Lengha @ Rs.2,000 per lengha
Less 5% trade discount.
Sept. 24 Goods returned to M/s Bombay Fashion House as per debit note No.103 :
2 Fancy Trousers @ Rs.500 per trouser
4 Fancy Hat @ Rs.100 per hat
Less 5% trade discount.
Sept. 28 Goods returned to M/s Bride Palace as per debit note No.105:
1 Fancy Lengha @ Rs.2,000 per lengha
Less 5% trade discount.

Solution:

Books of Hi- Life Fashions

Purchases (Journal) Book

Date

Invoice
No.

Name of supplier
(Account to be Credited)

L.F.

Amount
Rs.

2005

Sept 01

Sept 08

Sept 15

Sept 20

Sept 30



714

327

6781

1076



Ratna Traders

Bombay Fashion House

Zolta Fashions

Bride Palace

 

19,350

6,650

9,350

19,000
______
54,350

 

Purchases Return (Journal) Book

Date

Invoice No.

Name of supplier(Account to be Debited)

L.F.

Amount
Rs.

2005

Sept 10

Sept 24

Sept 28

Sept 30

 



102

103

106



Ratna Traders

Bombay Fashion House

Bride Palace

 

   

1,440

1,330

1,900
_____
4,670

 

Books of M/s Hi-Life Fashions

Dr.

Ratana Traders Account

Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Sept 10



Purchases
return
  1,440 2005

Sept 01

 

Purchases

 

 

19,350

 
Dr.

Bombay Fashion House Account

Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Sept 24



Purchases
return
 

1,330
2005

Sept 08

 



Purchases

 

 



6,650

 
Dr.

Zolta Fashions Account

Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

        2005

Sept 15

 



Purchases

 

 



9,350

 

Dr.

Bride Palace Account

Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Sept 28



Purchases return
  1,900 2005

Sept 20

 



Purchases

 

 



19,000

 
Dr.

Purchases Account

Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Sept 30



Sundries as per Purchases Journal
 

54,350
       
 
Dr.

Purchases Return Account

Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

       

 

2005

Sept 30

Sundries as

per Purchases return book

 

 



4,670

 

Question-11


Enter the following transactions in the Sales and Sales Return book of M/s Vineet Stores:
 
Date Details
Dec.01.

 

Sold goods on credit to M/s Rohit Stores as per invoice no.325 :
30 Kids Books @ Rs. 60 each.
20 Animal Books @ Rs. 50 each
Dec. 05

 

Sold goods on credit to M/s Mera Stores as per invoice no.328 :
100 Greeting Cards @ Rs.12 each.
50 Musical Cards @ Rs. 50 each
Less 5% trade discount.
Dec. 10

 

Sold Goods on credit to M/s Mega Stationers as per invoice no.329 :
50 Writing Pads @ Rs. 20 each.
50 Colour Books @ Rs. 30 each
20 Ink Pads @ 16 each
Dec. 15

 

Goods Returned from M/s Rohit Stores as per credit note no.201:
2 Kids Books @ Rs. 60 each
1 Animal Book @ Rs. 50 each
Dec. 19

 

Sold goods on credit to M/s Abha Traders as per invoice no.355 :
100 Cards Books @ Rs. 10 each.
50 Note Books @ Rs. 35 each
Less 5% trade discount.
Dec. 22

 

Goods returned from M/s Mega Stationers as per credit note no.204:
2 Colour Books @ Rs. 30 each
Dec. 26

 

Sold goods on credit to M/s Bharti Stores as per invoice no.325 :
100 Greeting Cards @ Rs. 20 each.
100 Fancy Envelopes @ Rs. 5 each
Dec. 30

 

Goods returned from M/s Abha Traders as per credit note no.207 :
20 Cards Books @ Rs. 10 each
5 Note Book@ Rs. 35 each
Less 5% trade discount

 


Solution:
 

Sales (Journal) Book

Date

Invoice No.

Name of the Customer

(Account to be Debited)

L.F.

Amount

Rs.

2005

Dec 01

Dec 05

Dec 10

Dec 19

Dec 26

Dec 31

 



325

328

329

335

340

 



Rohit stores

Mera Stores

Mega stationers

Abha Traders

Bharti Stores

 

   

2,800

3,515

2,820

2,375

2,500

______

14,010______

 

 

 

Sales Return (Journal) Book

Date

Credit

note No.

Name of the Customer

(Account to be Credited)

L.F.

Amount

Rs.

2005

Dec 15

Dec 22

Dec 30

Dec 31

 

 



201

204

206

 

 



Rohit stores

Mega stationers

Abha Traders

 

   

170

150

333

____

653__

 

 
Dr.

Ratana Stores Account

Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Dec 01



Sales
 

2,800
2005

Dec 15

 



Sales Return

 

 



170

 
Dr.

Mera Stores Account

Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Dec 05

Sales   3,515        
 
Dr.

Mega Stationers Account

Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Dec 10



Sales
 

2,820
2005

Dec 22

 



Sales Return

 

 



150

 

 
Dr.

Abha Traders Account

Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Dec 19



Sales
 

2,375
2005

Dec 30

 



Sales Return

 

 



333

 

 
Dr.

Bharti Stores Account

Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

2005

Dec 26



Sales
 

2,500
       
 
Dr.

Sales Account

Cr.

Date

Particulars

J.F.

Amount

Rs.

Date

Particulars

J.F.

Amount

Rs.

        2005

Dec 31

 



Sundries as per sales book

 

 



14,010

 
Dr.

Sales Return Account

Cr.

Date

Particulars

J.F.

Amount Rs.

Date

Particulars

J.F.

Amount Rs.

2005

Dec 31

Sundries as per sales return book  

653
       

 





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