VERY SHORT ANSWER QUESTIONS
Q1. Give two advantages of sub-division of journal.
(i) Division of work according to ability.
(ii) Easiness in posting.
Q2. What is a Cash Book?
Ans: Cash book is a special journal in which all transactions relating to cash and bank are recorded directly from source documents.
Q3. Why Cash Book is called a book of original entry?
Ans: Since all cash transactions are recorded for the first time in the cash book, it is therefore called a book of original entry. When a cash book is maintained, transactions of Cash and Bank are not recorded in journal.
Q4. Is Cash Book a journal or a ledger?
Ans. It is a journal as well as a ledger. It is a journal since cash and bank transactions are first recorded in it and a ledger since it serves the purpose of a Cash Account also. When a Cash Book is prepared, no separate Cash Account is opened in the ledger.
Q5. Write one difference between Cash Account and Cash Book.
Ans: Cash Account is an account in the ledger whereas Cash Book is a separate book.
Q6. Give one advantage of maintaining a Cash Book.
Ans: It is a journal as well as a ledger. When a Cash book is maintained, there is no need of opening a separate cash account cash amount in the ledger.
Q7. Why a Cash Book always shows a debit balance?
Ans: Because a businessman cannot pay more cash than what he has got.
Q8. Which form is filled for depositing Cash or Cheque in the bank.
Q9. What is a bearer cheque?
Ans: Payment of such a cheque is made on the counter of the bank either to the person whose name has been written on the cheque or to the bearer of the cheque.
Q10. What is an order cheque?
Ans: In case the word ‘bearer’ is struck off, the cheque an order cheque. In such a case bank will make the payment to the person whose name is written on the cheque.
Q11. What are Contra Entries?
Ans: Contra entries means entries which are recorded on both sides of the cash book. These entries are made while depositing or withdrawing cash from the bank.
Q12 Define Bank Overdraft.
Ans: Bank Overdraft is the excess amount withdrawn from the bank account than the amount deposited in it.
Q13. What is a Petty Cash Book?
Ans: It is prepared to make a record of petty expenses.
Q14. Give two advantages of Petty Cash Book.
Ans: (i) Saving of time and efforts of Chief Cashier.
(ii) Easiness in posting.
Q15. What is ‘Imprest System’ of Petty Cash Book?
Ans: Under this system, the petty cashier is given a definite sum, say 2,500, at the beginning of a certain period. This amount is called ‘imprest amount’. The petty cashier goes on paying all petty expenses out of this imprest amount and records them in the petty cash book maintained by him. At the end of the given period, say after a month, the chief cashier reimburses the amount actually spent by the petty cashier
Q16. Cash column of the Cash Book will always have a.debit balance. Why?
Ans: It is so because cash payments cannot be more than the cash in hand.
Q17. Bank column of the Cash Book can have either debit balance or credit balance. Why?
Ans: Bank column in the Cash Book represents Bank Account. Bank Account will have a credit balance if it is overdrawn and will otherwise have a debit balance.
Q18. Total of Discount column on the receipts or debit side of the Cash Book is posted to credit of Discount Received Account. Is it correct and why?
Ans: No, total of discount column on the receipts or debit side of the Cash Book is posted to the debit of Discount Allowed Account, it being an expense for the business.
Higher Order Thinking Skills (HOTS) Questions
Q. 1. A Rs.10,000 debit balance brought down in the Cash Book of a firm means that the firm has Rs.10,000 Cash in Hand. Do you agree?
Ans: Yes. Debit balance of cash brought down is an asset of the firm. It means the firm has cash balance of Rs.10,000 in hand.
Q. 2. Cash column in the Cash Book cannot have a negative balance, i.e., payments cannot be more than cash balance in hand. Why?
Ans: Yes. Cash column in the Cash Book cannot have a negative balance. It is so because if the firm does not have cash it cannot make the payment.
Q. 3. Why do you think only one account is posted to the Ledger Account from the Cash Book?
Ans: Although the Cash Book is a book of original entry, it is also a book where the Cash Account and Bank Account are maintained. In effect, it is both a book of original entry and a Ledger dedicated to those accounts. As a result, each transaction in the Cash Book is posted only once to another account.
Q. 4. Ranjan, an employee of Jumbo Electronics, deposited in the bank Rs.40,000 as the previous day's sale held overnight in the firm's safe. He has recorded the transaction in the Cash Book as follows: In the bank column on
Payments side; and in the cash column on Receipts side. Has he passed the entry correctly?
Ans: The entry recorded in the books of accounts is not correct. A deposit into the bank is recorded in the Receipts side of the Cash Book in the bank column and cash deposited is payment, it is recorded in the Payments side of the Cash Book in the cash column.
Q.5. Bank overdraft is a Liability while bank balance is an Asset. Do you agree?
Ans: Yes. Bank overdraft is the amount payable by the firm to the bank since the amount drawn is more than the balance held. Bank balance is the amount owned by the firm that is lying deposited in the bank, thus, it is an asset.
Q. 6. Grand Marketing has two Bank Accounts one in State Bank of India and another in Punjab National Bank. Rs.50,000 were transferred from State Bank of India to Punjab National Bank. What entry will you pass to record
the transaction in the Cash Book? How will you post them in the Ledger?
Ans: Rs.50,000 will be shown in the Receipts side of the Cash Book in the column for Punjab National Bank and in the Payments side of the Cash Book the amount will be shown in the column for State Bank of India. The entry will not be posted in the Ledger because the accounts of both the banks are maintained in the Cash Book. In the folio column on both the sides 'C' (indicating Contra Entry) will be written.
Q. 7. Anil, the Petty Cashier of Ebony, has an imprest of Rs.5,000 out of which he pays for petty expenses. He submits the details of payments every 15 days which is reimbursed to him. He submitted the details for the 15 days that
ended on 15th April, 2012 amounting to Rs.4,900. He has with him unpaid expense vouchers amounting to Rs.2,500. How much amount should be paid to him?
Ans: Rs.4,900, i.e., the amount already paid shall be reimbursed to the Petty Cashier to make the total imprest Rs.5,000. Unpaid expenses of Rs.2,500 will be paid by him out of the fresh imprest.
Q. 8. Is the balance of Petty Cash Book an asset or income?
Ans: Balance of Petty Cash Book is an asset for the firm.