NCERT Solution: Recording of Transactions-II | Accountancy Class 11 - Commerce PDF Download

Short Answers

Q1: Briefly state how the cash book is both journal and a ledger.
Ans: The cash book serves as both a journal and a ledger due to the following reasons:

• It records all cash transactions, including receipts and payments, in chronological order.
• When cash is deposited into the bank, the amount is noted in the bank column on the left and in the cash column on the right.
• Withdrawals from the bank are also recorded, with a 'C' for contra noted in the L.F. column, indicating these entries are not posted to the ledger.
• The bank column is balanced similarly to the cash column, and it may show a credit balance due to overdrafts.
• Cheques received are recorded in the bank column, ensuring all transactions are captured in one book.

This integration eliminates the need for separate cash or bank accounts in the ledger.

Q2: What is the purpose of contra entry?
Ans: A contra entry is a type of transaction that occurs when a deposit is made or money is withdrawn simultaneously from both the bank and cash accounts. Here are the key points regarding contra entries:

• When cash is deposited into the bank, the amount is recorded on the left side of the bank column and the same amount is entered on the right side of the cash column.
• Similarly, when cash is withdrawn from the bank, it is recorded in the opposite manner.
• In a double-column cash book, contra entries are marked with the letter 'C' in the L.F. column, indicating that these entries are not to be posted to the ledger.
• These entries do not affect the overall record, as they simply reflect the movement of cash between the bank and cash accounts.
• Contra entries help maintain accurate records without duplicating transactions in the ledger.

Q3: What are special purpose books?
Ans: Special purpose books are specific sections of a journal used to record various business transactions efficiently. Here’s a breakdown of their purpose and function:

• Efficiency: Businesses handle numerous transactions yearly, making it impractical to record each one in a general journal.
• Special Journals: These include Purchase Books and Sales Books, which are designed to capture specific types of transactions directly.
• Time-Saving: By using special purpose books, businesses can avoid duplicating entries, thus saving time and effort.
• Types of Special Purpose Books:
  1. Cash Book
  2. Purchases Book
  3. Sales Book
  4. Purchases Return Book
  5. Sales Return Book
  6. Journal Proper

Q4: What is petty cash book? How is it prepared?
Ans: A petty cash book is a financial record used by businesses to manage small, everyday expenses such as postage, telephone bills, and stationery. Instead of making individual journal entries for each minor transaction, a petty cash book allows for a more streamlined process. There are two main types of petty cash books:

• Original System: In this system, a specific amount is given to a cashier to cover petty expenses. The cashier records each expense as it occurs. Once the total amount is spent, a report is submitted to replenish the funds.
• Imprest System: Here, a fixed amount is allocated to the petty cashier at the start of an accounting period. After a certain time, the petty cash book is reviewed, and the petty cashier is reimbursed for the amount spent, restoring the initial fixed amount.

Q5: Explain the meaning of posting of journal entries?
Ans: The posting of journal entries refers to the process of transferring recorded transactions from the journal to the ledger. This is essential for maintaining accurate financial records. Key points include:

• The journal serves as the primary book for recording all business transactions.
• Each transaction is initially logged in the journal before being posted to the respective ledger accounts.
• This method helps in organising financial data, making it easier to track and manage accounts.
• Posting is typically done at regular intervals, such as daily or monthly, depending on the volume of transactions.

Q6: Define the purpose of maintaining a subsidiary journal.
Ans: The purpose of maintaining a subsidiary journal is to simplify the recording of frequent business transactions. This helps in managing the dynamic nature of transactions efficiently. Here are the key benefits:

• Streamlined Recording: It allows businesses to record daily transactions, such as purchases and sales, directly, reducing the complexity of entering them into the main journal.
• Improved Efficiency: By using subsidiary journals, businesses can save time and effort as they do not need to make separate entries in the main journal for every transaction.
• Organisational Clarity: These journals help differentiate between various types of transactions, making it easier for businesses to track their financial activities.

Q7: Write the difference between return inwards and return outwards.
Ans: The difference between return inwards and return outwards are as follows:

Q8: What do you understand about ledger folio?
Ans: The ledger folio (L.F.) number is a reference that indicates the page number of the corresponding ledger account. This system helps users to:

• Quickly locate the first entry in a ledger account.
• Track and examine transactions efficiently.
• Reduce the complexity of navigating through numerous daily transactions.

By using the ledger folio, it becomes easier to manage and review specific transactions without sifting through all entries.

Q9: What is the difference between a trade discount and a cash discount?
Ans: The difference between trade discount and cash discount are as follows:

Q10: Write the process of preparing ledger from a journal.
Ans: The process of preparing a ledger from a journal involves several key steps:

• Record Transactions: Begin by recording all transactions in the journal, ensuring to identify both loan and credit transactions.
• Adjust Ledger Accounts:Update the ledger accounts promptly, adhering to the standard format. The ledger should include the following columns:
  1. Date
  2. Details
  3. Journal Folio (JF)
  4. Amount
• Debit Entries: On the left side of the ledger, enter the date and details for debit transactions. Include the corresponding Journal Folio number and the amount.
• Credit Entries: On the right side, record the credit transactions, ensuring to include the date and amount for each entry.

By following these steps, you can effectively prepare a ledger from the journal entries.

Q11: What do you understand by the Imprest amount in a petty cash book?
Ans: The imprest amount refers to a fixed sum of money allocated to the petty cashier for managing small expenses over a specific period. Key points include:

• The petty cashier receives the imprest amount at the start of the accounting period.
• Regular checks are conducted on the petty cash book to monitor expenses.
• When the petty cashier spends a significant portion of the imprest amount, they are reimbursed to restore the original sum.
• This system ensures that the petty cashier can continue to make necessary small payments without delay.

Long Answers

Q1: Explain the need for drawing up the special purpose books.
Ans: The following is a requirement for keeping books for a specific purpose: 

1. Specialised purpose books help the business decide to respond within the organisation because the person assigned to keep the specific purpose book must keep his or her own book, which is why he or she is responsible for the true accuracy of the business.
2. The keeping of special-purpose books allows the organization to see the benefits of quick-made recording that accompanies a special-purpose book within the books because the entries are made in a very simple way. 
3. It helps to achieve the efficiency of accountants once they have acquired the technology within the domain of their special purpose book.
4. It is helpful for a business to make it easier when recurring transactions such as purchases and, therefore, the sale is sent directly within special purpose letters rather than made in magazine entries. v. Bookkeeping for special purposes continues to provide an opportunity for a business to track transactions if it is not required to check magazine entries for a book transaction.

Q2: What is a cash book? Explain the types of cash books.
Ans: A cash book is a financial record that tracks all transactions related to cash receipts and payments. It begins with the cash or bank balance at the start of a period and is typically maintained on a monthly basis. This book is essential for all organisations, regardless of size or profit status, as it serves both as a journal and a ledger for cash transactions. There are four main types of cash books:

1. Simple Cash Book: this sort of money book records only the cash transactions incurred by the business where within the accounting receipts and within the accounting the payments are recorded. 
2. Double column Cash book: this sort of money book records the cash and therefore the bank transaction made by the business. It thus has two columns on all sides of the cash book. These sorts of cash books record the contra entries during which both the cash and therefore the bank side is debited and credited. 
3. Triple column cash book: this sort of money book records the discount allowed and received by the business and thus comprises the extra column for an equivalent. 
4. Fund Book: The fund Book is maintained for the aim of recording the petty expenses made by the business like postage charges, telephone and stationery bills etc.

Q3: What is contra entry? How can you deal with this entry while preparing the double column cash book?
Ans: The Contra entry is made when the deposit or withdrawal made in the bank through the cash happens in a simultaneous manner. Thus, the effect of the contra entry happens on both sides of the cash book – debit and credit. It is denoted by the letter “C” in the Ledger Folio column. It is important to note that the contra entries do not affect the balance of the balance sheet because, as with the loss in Cash in Han,d there is a rise in the balance of the bank and vice versa.
The following is an example of when cash is withdrawn from a Bank:

This entry is illustrated in the cash book below:

Q4: What is a petty cash book? Write the advantages of a petty cash book?
Ans: The fund book is the cash book which records the petty expenses made by the business like postage charges, stationery, electricity bill, etc. The one that handles and maintains the fund book is named petty cashier.
The fund book is maintained in two ways.
Original System: Under this technique, a specific amount of sum is given to the cashier who spends it on the petty expenses and records an equivalent within the petty cash book. The petty cashier reports the small print of an equivalent when the quantity held by him/her is spent.
Imprest system: Under this technique, the petty cashier is given the actual fixed amount of sum at the start of every accounting period of which he/she is required to form expenses. After every certain duration of your time, the fund book is checked, and therefore, the amount spent on the petty expenses is given such that the fixed balance of the determined cash for the petty expenses is held by the petty cashier. This fixed amount of sum is mentioned as Imprest cash.
The benefits of bookkeeping are as follows: 

• Cost-Effective: It simplifies the recording of small transactions, reducing the need for extensive journal entries.
• Expense Control: By providing a limited cash amount, the business can monitor and control minor expenses effectively.
• Improved Efficiency: It allows the chief cashier to focus on larger transactions, as petty expenses are handled by the petty cashier.
• Fraud Prevention: The division of responsibilities makes it harder for fraud and embezzlement to occur.
• Convenient Recording: Keeping petty expenses separate from the main cash book prevents it from becoming bulky and unmanageable. This ensures that only significant transactions are recorded in the main cash book.

This, in turn, allows the chief financial officer to ensure the effectiveness of the small-scale recording system.

Q5: Describe the advantages of subdividing the Journal.
Ans: The benefits of classifying the magazine are as follows:

• The division of magazines makes it incumbent on the business to transfer responsibility to the people responsible for their workbooks of account. This, in turn, enables them to justify their accuracy and, as a result, their accuracy. It, therefore, serves as a check on the illegal participation of employees of the organization.
• The magazine division creates staff divisions where roles are assigned to individuals within the organization to maintain their proper book. This reduces the difficulty of having an accounting job. · Separate book production of different types of transactions saves business time when such transactions are often recorded directly in the books rather than making magazine entries equivalent.
• Separation of magazine entries allows the company to see the company to see effective results when everyone gives the responsibility to keep their books running smoothly. So they got the technology.
• Recording different transactions in different books makes it easier for a business to track transactions of different types by browsing their books. For example, in order to determine a credit purchase made by an organization on any given day, it can be viewed directly by browsing the receipts rather than looking at magazine entries that contain large transactions.

Q6: What do you understand by the balancing of accounts?
Ans: The balancing of the account means making the quantities accounting adequate to the amount within the accounting. This is often done on a regular basis from time to time by the business. The following are the steps in the balancing of accounts:
Step 1: Total the debit and, therefore, the accounting of the account and determine which amount is higher by tallying both of them.
Step 2: The entire of the sides comprising the upper amount either on the credit or on the accounting of the account has got to be written because the grand total amount.
Step 3: Determine the difference of the quantity of the lower side with the grand total to work out the balancing figure. The balancing figure has to be written as Balance c/d.
Step 4: The quantity of the balance c/d is going to be posted within the side whichever side features a lower total 
Step 5: This amount of Balance c/d has got to be brought down within the subsequent accounting period and treated as Balance b/d.

When the debit side exceeds the credit side, the difference is recorded on the credit side. Conversely, if the credit side is higher, the difference is noted on the debit side. This difference is referred to as the debit or credit balance, respectively. It's important to note that accounts related to expenses, losses, and gains are not balanced but are instead closed by transferring their totals to the trading and profit and loss accounts.

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Numerical Questions

Simple Cash Book

Q1: Enter the following transactions in a simple cash book for December 2016:

Ans:

Q2: Record the following transaction in a simple cash book for November 2016:

Ans:

Q3: Enter the following transaction in a simple cash book for December 2017:

Ans:

Bank Column Cash Book

Q4: Record the following transactions in a bank column cash book for December 2016:

Ans:

Q5: Prepare a double-column cash book with the help of following information for December  2016:

Ans: 

Q6: Enter the following transactions in double column cash book of M/s Ambica Traders for July 2017:

Ans: Books of M/s. Ambika Traders

Q7: Prepare double column cash book from the following information for July 2017:

Ans: Books of M/s. Ruchi Trader

Q8: Enter the following transaction in a double column cash book of M/s.Mohit Traders for January 2017:

Ans: Books of M/s. Mohit Traders

Q9: Prepare double column cash book from the following transactions for the year August  2017:
Ans:

Q10: M/s Ruchi trader started their cash book with the following balances on July 2017: cash in hand ₹1,354 and balance in bank current account  ₹7,560. He had the following transaction in the month of July 2017:

Ans: Books of M/s. Ruchi Trader

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Petty Cash Book

Q11: Prepare a petty cash book from the following transactions. The imprest amount is ₹2,000.

Ans:

Q12: Record the following transactions during the week ending  Dec.30, 2014 with a weekly imprest ₹ 500.

Ans:

Other Subsidiary Books

Q13: Enter the following transactions in the Purchase Journal (Book) of M/s Gupta Traders of July 2017:

Ans:  Books of M/s. Gupta Traders

Q14: Enter the following transactions in sales (journal) book of M/s. Bansal electronics:

Ans: Books of M/s. Bansal Electronics

Q15: Prepare a purchases return (journal) book from the following transactions for April 2017.

Ans:

Q16: Prepare Return Inward Journal (Book) from the following transactions of M/s Bansal Electronics for July 2017:

Ans: Books of M/s. Bansal electronics
Sales Returns Book

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Recording, Posting and Balancing

Q17: Prepare proper  subsidiary books and post them to the ledger from the following transactions for the month of February 2017:

Ans: Journal
Purchases Book

Sales Book

Sales Return Book

Purchases Return Book

Journal Proper

Ledger

Purchases Account

Sales Account

Sales Return Account

Purchases Return Account

Sachin’s Account

Kushal Traders’ Account

Manish Traders’ Account

Mukesh’s Account

Kunal Traders’ Account

Furniture Account

Tarun’s Account

Naresh’s Account

Kirit & Co. Account

Shri Chand & Co. Account

Ramesh’s Account

Q18: The following balances of ledger of M/s Marble Traders on April 01, 2017

Journalise the above transactions and post them to the ledger.
Ans:

Ledger