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Postage stamps purchased for Rs. 30 by business. This transaction will be recorded in:
- a)Purchase book
- b)Cash Book
- c)Petty Cash Book
- d)Journal
Correct answer is option 'C'. Can you explain this answer?
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Postage stamps purchased for Rs. 30 by business. This transaction will...
Understanding the Transaction
When a business purchases postage stamps for Rs. 30, it's essential to classify this transaction correctly in the accounting records.
Nature of the Expense
- Postage stamps are considered a minor expense and are generally used for mailing purposes.
- Such expenses do not represent a significant outflow of cash or inventory but rather a small operational cost.
Why Petty Cash Book?
- Small Amount: The transaction amount (Rs. 30) is relatively low, making it suitable for the petty cash system, which is designed to handle small, everyday expenses.
- Convenience: Petty cash books are used for quick and easy tracking of minor expenditures without needing extensive documentation.
- Immediate Recording: Since postage stamps are often purchased on an as-needed basis, recording them in the petty cash book allows for immediate accounting, simplifying the tracking of small expenses.
Other Options Explained
- Purchase Book: This book is used for recording credit purchases of goods, not for services or minor expenses like postage.
- Cash Book: While it records all cash transactions, it’s primarily for larger cash transactions and sales, not petty expenses.
- Journal: The journal is used for recording significant transactions that require detailed explanations, which is not the case with a simple postage stamp purchase.
Conclusion
Hence, the correct option is 'C', as the purchase of postage stamps for Rs. 30 is best recorded in the Petty Cash Book, reflecting the nature of the transaction accurately.
When a business purchases postage stamps for Rs. 30, it's essential to classify this transaction correctly in the accounting records.
Nature of the Expense
- Postage stamps are considered a minor expense and are generally used for mailing purposes.
- Such expenses do not represent a significant outflow of cash or inventory but rather a small operational cost.
Why Petty Cash Book?
- Small Amount: The transaction amount (Rs. 30) is relatively low, making it suitable for the petty cash system, which is designed to handle small, everyday expenses.
- Convenience: Petty cash books are used for quick and easy tracking of minor expenditures without needing extensive documentation.
- Immediate Recording: Since postage stamps are often purchased on an as-needed basis, recording them in the petty cash book allows for immediate accounting, simplifying the tracking of small expenses.
Other Options Explained
- Purchase Book: This book is used for recording credit purchases of goods, not for services or minor expenses like postage.
- Cash Book: While it records all cash transactions, it’s primarily for larger cash transactions and sales, not petty expenses.
- Journal: The journal is used for recording significant transactions that require detailed explanations, which is not the case with a simple postage stamp purchase.
Conclusion
Hence, the correct option is 'C', as the purchase of postage stamps for Rs. 30 is best recorded in the Petty Cash Book, reflecting the nature of the transaction accurately.
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Community Answer
Postage stamps purchased for Rs. 30 by business. This transaction will...
The value 30 is small so recorded in petty cash book.
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Postage stamps purchased for Rs. 30 by business. This transaction will be recorded in:a)Purchase bookb)Cash Bookc)Petty Cash Bookd)JournalCorrect answer is option 'C'. Can you explain this answer?
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