Subsidiary Books - 3 - Free MCQ Practice Test with solutions, Commerce

Q: In which book of original entry, will you record the following transactions?

Q: The debit notes issued are used to prepare

The correct book of original entry to record the following transactions is the Purchase Return Book.

Reasoning:

Debit notes are issued when a buyer returns goods to the seller or when there is an overcharge or error in the invoice. They are used to reduce the amount payable by the buyer to the seller. Therefore, the purchase return book is the appropriate book of original entry to record these transactions.

Explanation:

The purchase return book is a subsidiary book which is used to record all transactions related to the return of goods to the suppliers. It is maintained to keep a record of goods returned by the buyer to the seller, along with the reasons for return.

Key Points:

• Debit notes are issued when there is a return of goods, overcharge, or error in the invoice.


• The purchase return book is used to record transactions related to the return of goods to the suppliers.


• The purchase return book helps in keeping track of goods returned and the reasons for return.


• By recording these transactions in the purchase return book, the accounts payable balance is reduced.

Therefore, the correct answer is B: Purchase return book.

Answer: B. Cash Book

Explanation:

The given transaction involves an allowance for early payment of cash. This transaction should be recorded in the Cash Book, which is a book of original entry used to record all cash transactions.

Reasons for recording the transaction in the Cash Book:

• The transaction involves a cash payment, which is directly related to the cash inflow and outflow of the business.


• Allowance for early payment is a financial incentive provided to encourage customers to make prompt payments.


• The Cash Book is specifically designed to record cash receipts and payments, making it the appropriate book of original entry for this transaction.

Advantages of recording the transaction in the Cash Book:

• Provides a clear and systematic record of all cash transactions, including allowances and discounts.


• Facilitates easy tracking and reconciliation of cash inflows and outflows.


• Helps in maintaining an accurate account balance and monitoring the cash position of the business.


• Serves as a reliable source of information for financial reporting and analysis.

Therefore, the transaction of offering an allowance for early payment of cash should be recorded in the Cash Book, making option B the correct answer.

Answer: A. Journal Proper (General Journal)

Explanation:

When a second-hand motor car is purchased on credit, the transaction should be recorded in the Journal Proper (General Journal) as it is a non-cash transaction and does not involve the use of cash or bank accounts. Here's a detailed explanation:

Journal Proper (General Journal):

• The Journal Proper is used to record all non-cash transactions and transactions that do not fit into any other specialized books of original entry.


• It is a general-purpose book where all types of transactions, including credit purchases, credit sales, expenses, and incomes, are recorded.


• The purpose of the Journal Proper is to have a chronological record of all transactions in one place for easy reference.


• The entry for the purchase of the second-hand motor car on credit from B Brothers for Rs. 10,000 would be recorded as follows:

Journal Proper Entry:

• Date: [Date of the transaction]


• Account Debited: [Motor Car Account]


• Account Credited: [B Brothers Account]


• Amount: Rs. 10,000


• Narration: Purchased a second-hand motor car on credit from B Brothers for Rs. 10,000

By recording this transaction in the Journal Proper, it becomes a part of the complete and systematic record-keeping process of the business. The Journal Proper provides a clear audit trail and helps in the preparation of financial statements and analysis of the business's financial position.

Accounting for partial recovery from Mr. C of an amount of Rs. 2,000 earlier written off as bad debt:

• It involves the receipt of cash from Mr. C.


• The amount was previously written off as a bad debt, and the recovery of a portion of it is considered a cash inflow.

• Journal Proper (General Journal): The Journal Proper is used for recording non-routine transactions, adjusting entries, and correcting entries. The partial recovery from Mr. C does not fall under these categories.


• Sales Book: The Sales Book is used for recording credit sales made to customers. The partial recovery from Mr. C is not a credit sale.


• Purchase Book: The Purchase Book is used for recording purchases made by the business. The partial recovery from Mr. C is not a purchase transaction.

• Journal Proper (General Journal): The Journal Proper is used to record transactions that do not fit into any specific books of original entry. It is used for miscellaneous transactions, including rectifying errors, adjusting entries, and other non-routine transactions.


• Rectifying the error: The transaction in question involves rectifying an error made in recording a credit purchase as a credit sale. This error needs to be corrected, and the appropriate entry needs to be made in the accounts.


• Credit purchase of goods: The original transaction involved a credit purchase of goods worth Rs. 10,000. This means that the company acquired goods on credit from a supplier.


• Recorded as credit sale to Mr. D: However, the transaction was mistakenly recorded as a credit sale to Mr. D, who is not the actual customer in this case.


• Discovered two months later: The error was discovered two months later, indicating that the mistake was not immediately identified.


• Journal entry in Journal Proper: To rectify this error, a journal entry needs to be made in the Journal Proper. The entry would involve debiting the Sales account and crediting the Accounts Payable or Creditors account to reverse the incorrect credit sale entry. Simultaneously, the correct entry should be made in the Purchases account to record the credit purchase of goods.

Answer:

Book of Original Entry: Purchase Book

Reasoning:

• The credit purchase of stationery worth Rs. 5,000 by a stationery dealer is a transaction involving the purchase of goods.


• The Purchase Book is used to record all credit purchases of goods for resale or for use in the business.


• It is a subsidiary book where all credit purchases are recorded in chronological order.


• The details recorded in the Purchase Book include the date of purchase, name of the supplier, description of the goods, quantity, rate, and amount.


• Since the transaction involves a credit purchase of stationery, it should be recorded in the Purchase Book.

Therefore, the correct answer is A: Purchase Book.

Book of original entry: Journal Proper (General Journal)

Reason:

When a bill receivable is dishonored, it needs to be recorded in the appropriate book of original entry. In this case, the dishonored bill receivable is a special transaction that does not fit into any specific book of original entry such as Purchases Return Book, Bills Receivable Book, or Purchases Book. Hence, it should be recorded in the Journal Proper (General Journal) which is used for recording all other miscellaneous transactions that cannot be recorded in any other specialized books.

Q. Unpaid salary for Rs. 340 is to be provided for in the accounts.

The transaction mentioned above involves recording an unpaid salary in the accounts. To record this transaction, we need to determine the appropriate book of original entry. The correct book of original entry for this transaction is the Journal Proper (General Journal). Here is why:

• The Journal Proper (General Journal) is used to record non-routine and miscellaneous transactions that do not fit into any specific books of original entry.


• Unpaid salary is not a regular expense or purchase, therefore it does not belong in the Purchases Book or Purchases Return.


• Unpaid salary is not a form of receivable, so it does not belong in the Bills Receivable Book.

Therefore, the correct book of original entry to record the unpaid salary of Rs. 340 is the Journal Proper (General Journal).

Goods Outward Journal is meant for recording all returns of goods

A: Sold on credit

• Book of Original Entry: Sales Journal


• Explanation: Sales made on credit are recorded in the Sales Journal. This journal is used to record all credit sales transactions.

B: Purchased on credit

• Book of Original Entry: Purchase Journal


• Explanation: Purchases made on credit are recorded in the Purchase Journal. This journal is used to record all credit purchases transactions.

C: Purchased on cash

• Book of Original Entry: Cash Book


• Explanation: Purchases made with cash are recorded in the Cash Book. This book is used to record all cash transactions, including cash purchases.

D: None of the above

• Explanation: None of the options provided is applicable. The correct option for recording returns of goods is the Goods Outward Journal.

• Total cost of goods sold for the period. This information is recorded in the subsidiary ledger for the inventory account, which tracks the cost of goods sold and inventory balances.


• The quantity of a particular product sold during the period. The subsidiary ledger for the inventory account also tracks the quantity of products sold.


• The amount owed to a particular creditor. This information is recorded in the subsidiary ledger for accounts payable, which tracks the amounts owed to individual creditors.

Book of Original Entry:

Purchases Day Book:

Purchases day book is a book of original entry where all credit purchases of goods and services are recorded in chronological order. It is a subsidiary book used to record purchases made on credit by a business. Each entry in the purchases day book includes the details of the supplier, date of purchase, invoice number, description of the goods or services, and the amount of the purchase.

Transaction:

The total of the purchases day book is posted periodically to the debit of:

Answer: A. Purchases account.

Explanation:

When the total of the purchases day book is posted periodically, it is recorded in the general ledger under the Purchases account. The Purchases account is a nominal account and is debited with the total amount of credit purchases made during a specific period. This allows the business to keep track of its total purchases and ultimately calculate the cost of goods sold.

Summary:

The total of the purchases day book is recorded in the Purchases account in the general ledger. This helps the business track its credit purchases and calculate the cost of goods sold.

Explanation:

Purchases day book is a book of original entry used to record all purchases made by a business. It is also known as a purchase journal or purchase book. The book is used to keep a record of all purchases in chronological order, whether they are made in cash or on credit.

Answer:

The following transactions will be recorded in the purchases day book:

• All cash purchases: This includes any purchases made by the business using cash. These transactions will be recorded in the purchases day book.


• All credit purchases: This includes any purchases made by the business on credit. These transactions will be recorded in the purchases day book.


• Credit purchases of goods in trade: This refers to purchases of goods that are intended to be resold by the business. These transactions will also be recorded in the purchases day book.


• None of the above: If the transaction does not fall into any of the above categories, it will not be recorded in the purchases day book.

Therefore, the correct answer is C: Credit purchases of goods in trade.

The Purchases Book is a subsidiary book used in accounting to record all the credit purchases of goods dealt in by a business. It is a book of original entry where all the details of credit purchases are recorded before they are posted to the general ledger.

• A: Cash purchase of goods: This option is incorrect because the Purchases Book specifically records credit purchases and not cash purchases.


• B: Credit purchase of goods dealt in: This option is correct. The Purchases Book records all the credit purchases of goods dealt in by a business.


• C: All purchases of goods: This option is not entirely accurate. The Purchases Book only records credit purchases, not cash purchases.

Therefore, the most appropriate answer is option B: Credit purchase of goods dealt in.

• Journal: The journal is a book of original entry where all financial transactions of a business are recorded in chronological order. It serves as a primary record of financial transactions.


• Sales Book: The Sales Book is a specialized journal that specifically records all sales transactions made by a business. It includes details such as the date of the sale, the name of the customer, the description of the goods or services sold, the quantity sold, and the amount received.


• Importance: The Sales Book is important for the following reasons:




• Organized Recordkeeping: It helps in maintaining a systematic and organized record of all sales made by the business.


• Tracking Sales: It enables the business to track and analyze its sales performance over a specific period of time.


• Reference: It provides a reliable source of information for future reference, such as when preparing financial statements or responding to customer inquiries.


• Audit Trail: It helps in creating an audit trail, which is crucial for internal and external audits.

The Sales book is a subsidiary book which records only credit sales. Sales A/c is a ledger account which includes cash as well as credit sales. Thus, we need to post the total of sales book to the credit of Sales A/c.
The correct option is A.