Test: Cash Book - 2 - Commerce MCQ

The total of the discounts is recorded in the cash book and affects the accounts as follows:

• The total discounts on the debit side represent amounts deducted by customers.
• This total is posted to the debit of the discount allowed account.
• Discounts allowed are considered expenses for the business.

Thus, the correct posting for the total of discounts is to the debit of the discount allowed account.

The types of cash books include:

• Simple column cash-book: Records all cash transactions in a single column.
• Double column cash-book: Contains two columns for cash and bank transactions.
• Three column cash-book: Includes columns for cash, bank, and discounts.

Therefore, the correct answer is that all of the above are types of cash books.

• A Cash Book records all cash and bank transactions.
• It is originally a subsidiary book because it records transactions in a detailed way like other day books (such as sales or purchases).
• However, it also serves the purpose of a principal book (like a ledger) because cash and bank accounts are directly posted from it.

Therefore, Correct Answer - Option A

The petty cash column is not a part of a three-column cash book. A three-column cash book typically includes:

• Cash column - records all cash transactions.
• Bank column - tracks transactions involving bank deposits and withdrawals.
• Discount column - records any discounts received or given.

The petty cash column is used for small, incidental expenses and is separate from the main cash book structure.
Therefore, Correct Answer - Option C

Salaries due for the month of March will not be recorded in the cash book. This is because:

• Salaries are typically not immediate cash transactions.
• They do not appear on either the receipt or payment sides of the cash book.
• Instead, they are usually accounted for in the payroll records.

Thus, the correct conclusion is that salaries due for March will appear nowhere in the cash book.

Contra entries are specific to the three-column cash book, which includes the bank, cash, and discount columns. These entries record transactions that affect both the cash and bank columns simultaneously, such as:

• Cash deposited into the bank,
• Cash withdrawn from the bank for office use, and
• Receivable cheque deposited into the bank on another day.

These entries are essential for maintaining accurate records of the cash and bank transactions in a business.
Therefore, Correct Answer - Option B

The Cash Book is essential for tracking financial transactions. It records:

• All cash receipts - Money coming into the business.
• All cash payments - Money going out of the business.
• Both cash receipts and payments - This includes all cash transactions.

It serves as both a journal and a ledger for cash transactions, ensuring accurate financial tracking.
Therefore, Correct Answer - Option C

The closing balance of petty cash book is considered as Asset. Petty Cash is a current asset account; it is part of a company's cash.

If Ram has sold goods for cash, the entry is recorded in the Cash Book, because it tracks all cash transactions.
Therefore, Correct Answer - Option A