Unit 5: Question & Answer - Cash Book | Principles and Practice of Accounting - CA Foundation PDF Download

SUMMARY
♦ Cash book contains cash transactions and also bank transactions, if it has a separate book column. It is both a subsidiary book and a principal book.
♦ Cash book can be prepared adding discount column also.
♦ For small payments, petty cash book is maintained separately recording the particulars of payment and its amount. The fixed amount is given to the petty cashier for making small payments in the beginning of the period. The amount spent is replenished so that he will have again the fixed sum in the beginning of the next period. This system is known as imprest system of petty cash book.

Multiple Choice Questions
Ques 1: The total of discounts column on the debit side of the cash book, recording cash discount deducted by customers when paying their accounts, is posted to the
(a) Credit of the discount allowed account.
(b) Debit of the discount allowed account
(c) Credit of the discount received account.
Ans: b
Ques 2: Cash book is a type of but treated as a of accounts.
(a) Subsidiary book, principal book
(b) Principal book, subsidiary book
(c) Subsidiary book, subsidiary book
Ans: a
Ques 3: Which of the following is not a column of a three-column cash book?
(a) Cash column
(b) Bank column
(c) Petty cash column
Ans: c
Ques 4: Contra entries are passed only when
(a) Double-column cash book is prepared
(b) Three-column cash book is prepared
(c) Simple cash book is prepared
Ans: b
Ques 5: The Cash Book records
(a) All cash receipts
(b) All cash payments
(c) All cash receipts and payments
Ans: c
Ques 6: The balance in the petty cash book is
(a) An expense
(b) A profit
(c) An asset
Ans: c
Ques 7: If Ram has sold goods for cash, the entry will be recorded
(a) In the Cash Book
(b) In the Sales Book
(c) In the Journal
Ans: a

Theory Questions
Ques 1: Is cash book a subsidiary book or a principal book? Explain.
Ans: Cash transactions are straightaway recorded in the Cash Book and on the basis of such a record, ledger accounts are prepared. Therefore, the Cash Book is a subsidiary book. But the Cash Book itself serves as the cash account and the bank account; the balances are entered in the trial balance directly. The Cash Book, therefore, is part of the ledger also. Hence, it has also to be treated as the principal book. The Cash Book is thus both a subsidiary book and a principal book.

Ques 2: What are the various kinds of cash book?
Ans: The main Cash Book may be of the three types:
(i) Simple Cash Book;
(ii) Two-column Cash Book;
(iii) Three-column Cash Book.
In addition to the main Cash Book, firms also generally maintain a petty cash book but that is purely a subsidiary book.

Ques 3: What are the advantages of a three column cash book?
Ans: The advantages of three column Cash Book are that -
(a) the Cash Account and the Bank Account are prepared simultaneously, therefore the double entry is completed in the Cash Book itself. Thus the contra entries can be easily cross-checked in Cash column in one side and the Bank column in the other side of the Cash Book. Also the chances of error are reduced.
(b) the information regarding Cash in Hand and the Bank Balance can be obtained very easily and quickly as there is no need to prepare Ledger of the Bank Account.

Practical Questions
Ques 1: Shri Ramaswamy maintains a Columnar Petty Cash Book on the Imprest System. The imprest amount is ' 500. From the following information, show how his Petty Cash Book would appear for the week ended 12th September, 2015:
Ans: