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In three column Cash Book, when does contra entry occurs?
- a)Withdrawal of cash from bank
- b)Payment to creditors
- c)Withdrawal of cash from bank for personal use
- d)All of the above
Correct answer is option 'A'. Can you explain this answer?
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In three column Cash Book, when does contra entry occurs?a)Withdrawal ...
In case of three column cash book, when cash is withdrawn from bank for use in the office the amount is entered in the bank column in the payment side and also in the cash column on the receipt side. Such entries are called contra entries and a letter "C" should be written in front of such entries in the L.F. column.
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In three column Cash Book, when does contra entry occurs?a)Withdrawal ...
Contra Entry in Three Column Cash Book
Contra Entry is a type of transaction that occurs when the same amount of money is both debited and credited in two different accounts simultaneously. This type of entry is recorded in the Three Column Cash Book in the following situations:
1. Withdrawal of cash from bank: When the owner withdraws cash from the bank account for business purposes, it is recorded in the cash column as a debit entry and in the bank column as a credit entry. This is known as a contra entry because the same amount of money is both debited and credited in two different accounts at the same time.
2. Payment to creditors: When the business makes a payment to the creditors through a cheque, it is recorded in the bank column as a debit entry and in the cash column as a credit entry. This is not a contra entry because the payment is made to a third party and not to the business itself.
3. Withdrawal of cash from bank for personal use: When the owner withdraws cash from the bank account for personal use, it is recorded in the drawings column as a debit entry and in the bank column as a credit entry. This is not a contra entry because the money is not used for business purposes.
In conclusion, the correct answer is option 'A' because contra entry occurs only when the owner withdraws cash from the bank account for business purposes.
Contra Entry is a type of transaction that occurs when the same amount of money is both debited and credited in two different accounts simultaneously. This type of entry is recorded in the Three Column Cash Book in the following situations:
1. Withdrawal of cash from bank: When the owner withdraws cash from the bank account for business purposes, it is recorded in the cash column as a debit entry and in the bank column as a credit entry. This is known as a contra entry because the same amount of money is both debited and credited in two different accounts at the same time.
2. Payment to creditors: When the business makes a payment to the creditors through a cheque, it is recorded in the bank column as a debit entry and in the cash column as a credit entry. This is not a contra entry because the payment is made to a third party and not to the business itself.
3. Withdrawal of cash from bank for personal use: When the owner withdraws cash from the bank account for personal use, it is recorded in the drawings column as a debit entry and in the bank column as a credit entry. This is not a contra entry because the money is not used for business purposes.
In conclusion, the correct answer is option 'A' because contra entry occurs only when the owner withdraws cash from the bank account for business purposes.
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In three column Cash Book, when does contra entry occurs?a)Withdrawal of cash from bankb)Payment to creditorsc)Withdrawal of cash from bank for personal used)All of the aboveCorrect answer is option 'A'. Can you explain this answer?
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