VERY SHORT ANSWER QUESTIONS
Q1. What is a purchase book?
Ans: It is a subsidiary book which records Credit purchases of goods
Q2. What is a sales book?
Ans: It is a subsidiary book which records credit sales of goods.
Q3. Give one point of distinction between purchased Book and Purchases Account
Ans: Purchases book is a part of Journal whereas purchases account is a part of Leger.
Q4. What is a debit note?
Ans: A debit note is prepared by the purchaser when goods are returned by him. It is called a debit note because the party’s account is debited with the amount written in it.
Q5. What is a credit note?
Ans: A credit note is prepared by the seller when the goods sold are received back. It is called a credit note because the party’s account, from whom goods are received back, is credited with the amount written in the note.
Q6. Mention two transactions which are recorded in Journal proper.
(i) Opening Entry
Q7. For what purposes is a Journal Proper used?
Ans: Journal Proper is a residuary book which is used for recording those transactions which are not recorded in any of the other books of original entry.
Q8. Give two examples of entries which appear in a ‘Journal Proper’.
Ans: Credit purchase of plant and machinery, Credit sales of fixed assets.
Q9. Mention the subsidiary books in which following transactions are recorded along with reason thereof:
(i) Purchase of furniture on credit for use in shop.
(ii) Sale of goods on credit.
(iii) Goods returned by Debtors.
(iv) Purchase of stock on credit.
(v) Providing for interest on capital to proprietor.
(vi) Goods returned to creditors.
(vii) Sale of goods for cash.
Ans: (i) Journal Proper: Because purchase of fixed assets on credit is recorded in Journal Proper.
(ii) Sales Book: Because Sales Book records only credit sales of goods.
(iii) Sales Return Book: Because goods returned by customer are recorded in Sales Return Book.
(iv) Purchases Book: Because Purchases Book records only Credit Purchases of goods.
(v) Journal Proper: Because Journal Proper records all those transactions which cannot be recorded in any of the other subsidiary books. Interest on proprietor’s capital is also one of those items which can only be recorded in Journal Proper.
(vi) Purchases Return Book: Because it records only goods returned by the firm to its suppliers.
(vii) Cash Book: Because Cash Book records cash receipts and cash payments.
Q10. Name the books of original entry where the following transactions will be recorded with reasons thereof:
(i) Goods purchased from Ram Lal for Rs.5,000 on credit.
(ii) Provision for doubtful debts created @ 5% on debtors with books value of Rs.10,000.
(iii) Defective goods sold to Babita on credit worth Rs.4,000 were returned by her.
(iv) Purchased furniture on credit from Mr. Ratan Singh for Rs.15,000 for use in the business.
(i) Purchases Book because it is credit purchase of goods for sale.
(ii) Journal Proper because it will not be recorded any other subsidiary books.
(iii) Sales Return Book because it is return to goods sold.
(iv) Journal Proper because it will not be recorded in other subsidiary books.
Q11. Purchases Book is a record prepared from the invoices received from suppliers. Is it correct? Give reasons.
Ans: Yes. Purchases can be either in cash or on credit. Credit purchases are recorded in the Purchases Book. The source documents for recording entries in the Purchases Book are invoices or bills received from the suppliers of goods.
The entries are made with the net amount of the invoice after deducting trade discount.
Q12. Total of the purchase invoices recorded in the Purchases Book is posted to debit side of the Purchases Account in the Ledger and credited to the accounts of suppliers. Do you agree? Give reasons.
Ans: Yes. Purchase is an expense account therefore, following the rule ‘Increase in expenses is debited and decrease credited.’ Purchases Account is debited. Since, the Purchases Book contains records of credit purchases, the Suppliers Account is credited following the rule applicable to liabilities accounts, i.e., ‘Increase in liabilities is
credited and decrease debited.’
Q13. Do you agree that a Sales Book is used to record invoices issued to customers in respect of goods sold on credit and not cash? Give reasons.
Ans: Yes. Sales can be either in cash or on credit. Credit sales are recorded in the Sales Book and cash sales in the Cash Book. The source documents for recording entries in the Sales Book are invoices or bills issued to customers. Entries are recorded with the net amount of the invoice after deducting trade discount.
Q14. Total of the Sales Book is posted to the credit side of the Sales Account in the General Ledger while individual account of customers is debited by the amount of their respective purchases. Is the above statement correct?
Ans: Yes. Sale is a revenue account and, therefore, following the rule ‘Increase in revenue is credited and decrease debited’ Sales Account is credited. Since, the Sales Book contains records of credit sales, the Purchasers’ Account (being debtors) is debited following the rule applicable to Asset Accounts, i.e., ‘Increase in assets is debited and decrease credited.’
Q15. A firm purchased goods from M/s. R.K. & Co. Because the goods received were not as per order, the firm intended to return the goods. M/s. R.K. & Co. offered a discount of Rs.5,000 if the firm retained the goods. The firm accepted the offer and M/s. R.K. & Co. sent a credit note for the amount. In your opinion, what entry should be recorded by M/s. R.K. & Co. and why?
Ans: M/s. R.K. & Co. has allowed a discount of Rs.8,000 because the goods supplied were not as per the order. Therefore, the amount of Rs.5,000 should be debited to M/s. R.K. & Co. and credited to the Purchases Account.
Q16. A wholesaler sold 55 items to a retailer at a price of Rs.200 each, less 20% Trade Discount. The retailer subsequently returned 12 of these items. As a result of this, the retailer should be sent a credit note for how much amount?
Ans: The wholesaler should send a credit note for Rs.1,920 to the retailer, being the amount of 12 items @ Rs.200 and allowing 20% Trade Discount.
Q17. (a) Goods destroyed by fire will be recorded in which of the following books?
(i) Purchases Books; (ii) Sales Book; (iii) Journal.
(b) Sen sent a Credit Note to Amar on account of goods sold received back. This transaction will be recorded in which of the following books?
(i) Sales Books; (ii) Sales Return Book; (iii) Purchases Return Book.
Ans: (a) (iii) (b) (ii)
SHORT ANSWER QUESTIONS
Q1. Give specimen of the following, with two entries in each:-
(i) Purchase Book (ii) Purchase Return Book
Q2. Explain Debit and Credit note in five sentences
Q3. Name the various entries which have to be passed through a Journal even though we might have keptall the subsidiary books in the business.