NCERT Solutions for Class 11 Accountancy Chapter 4 Recording of Transactions 2

Q.1 Briefly state how the cash book is both journal and ledger.

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Cash book is a journal as well as a ledger. It is a journal since cash and bank transaction 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.

Q.2 What is the purpose of contra entry?

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Contra entries means entries which are recorded on both sides of cash book and signified by writing ‘C’ in the ledger folio.

When cash is deposited into the bank or when cash is withdrawn from the bank for use in the office, each such transaction affects both ‘Cash Column’ as well as ‘Bank Column’ and the transaction is therefore recorded on both sides of cash book. Such entries, the double entry of which is completed in the cash book itself are called contra entries.

Q.3 What are special purpose books?

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Sub-division of the journal into various books recording transactions of similar nature are called special purpose books such as cash book, purchases book, sales book, purchases return book, sales return book and journal proper.

Q.4 What is petty cash book? How it is prepared?

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Petty cash book is the book which is used for the purpose of recording expenses involving small amounts. Besides petty expenses, receipts from main cash are recorded.

Petty cash book is maintained by Petty Cashier and acts as the Petty Cash account.

Under Imprest system of petty cash, an estimate is made of amount required for petty expenses for a period (for a week or a month). The amount so ascertained is given to the Petty Cashier in the beginning of a period. The amount paid by him during the period. Thus he/she will again have the fixed amount in the beginning of the new period reimbursed. This amount is called imprest money and this system of paying advance in the beginning and reimbursing the amount spent from time to time is called imprest system.

Q.5 Explain the meaning of posting of journal entries?

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Posting is the process of transferring entries from journal or subsidiary books to the ledger. Posting is the next step in the accounting cycle after journalising.

Q.6 Define the purpose of maintaining subsidiary journal.

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The purpose of maintaining subsidiary journal are:

• It saves time and efforts in recording.
• It enables division of work, leading to an enhancement of efficiency, as particular accountant takes care of particular books.
• It also makes each accountant more responsible and accountable for the books assigned to them.
• It records routine and repetitive transactions at one place.

Q.7 Write the difference between Returns inward and Returns outward.

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Returns Outward book is maintained to record the goods or materials returned to the suppliers from whom they had been purchased, whereas Returns Inward Book is maintained to record the goods or materials returned by the purchaser (customer) that had been sold on credit.

Returns Outward book is also known as Purchases Returns book, whereas Returns Inward book is also known as Sales Returns book.

Returns inward is deducted from Sales in the Trading Account, whereas Returns Outward is deducted from the Purchases in the Trading Account.

Q.8 What do you understand by ledger folio?

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The page number or folio number of the ledger account where the posting has been made from the journal is recorded in the Ledger Folio (L.F.) column of the journal.

For example, if we make a posting in Machinery A/c which is prepared at page 30 of the ledger, we shall write 30 in the L.F. column against Machinery A/c in the Journal.

Q.9 What is difference between trade discount and cash discount?

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Distinction between Trade Discount and Cash Discount:

Q.10 Write the process of preparing ledger from a journal.

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Posting is the process of transferring entries from journal or subsidiary books to the ledger.

The following rules should be observed while posting entries in the ledger:

• All transactions relating to an account should be entered at one place.
• The word ‘To’ is used before the accounts which appear on the debit side of an account. Similarly the word ‘By’ is used before the accounts which appear on the credit side of an account.
• If an account has been debited in the journal entry, the posting in the ledger should also be made on the debit side of such account and If an account has been credited in the journal entry, the posting in the ledger should also be made on the credit side of such account.
• Similar amount which has been posted on the debit side of an account should also be posted on the credit side of another account.

Q.11 What do you understand by imprest amount in petty cash book?

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Under Imprest system of petty cash book, the petty cashier is a given a definite sum at the beginning of a certain period. This amount is called imprest amount.

Q.12 Explain the need for drawing up the special purpose books.

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If the size of business is small one, it may be possible to enter each and every transaction in one book only, i.e., Journal, which is generally known as the book of original entry. But when the size of the business grows and the number of transactions become very large, it is no longer possible to record all transactions in one journal only. As such the journal is sub-divided into a number of special journals.

These special journals are also known as day books or special purpose books or subsidiary books. Each subsidiary book is meant for recording all the transactions of a similar nature.

Following subsidiary books are most commonly used in a business are:

Cash Book: This book is used for recording all transactions relating to cash/bank receipts and payments.

Purchase Book: This book is used for recording the credit purchase of goods.

Sales Book: This book is used for recording the credit sales of goods.

Purchase Return Book: When the goods previously purchased on credit are returned to the suppliers, such returns are recorded in this book.

Sales Return Book: When the goods previously sold on credit are returned by the customers, such returns are recorded in this book.

Bills Receivable Book: This book is used for recording the receipts of bills receivables, promissory notes from various parties. The trader is to receive payment for these bills.

Bills Payable Book: This book is used for recording the issue of bills payables, promissory notes. The trader is to receive payment for these bills.

Journal proper: This book is used for recording the transactions which cannot be recorded in any other subsidiary books.

Q.13 What is cash book? Explain the types of cash book.

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Cash book is used for recording all transactions relating to cash receipts and cash payments. All banking transactions relating to receipts and payments are also recorded in this book.

Cash book may be of four types:

(1) Single column Cash Book or One column Cash Book: This book is used for recording cash transactions only. Its format is similar to an account, with one amount column on each side. The left hand side known as ‘Debit’ records of cash and the right hand side known as ‘Credit’ records payments.

Format:

(2) Double Column Cash Book: This cash book which has two columns on each side of the cash book, one to record cash transactions and another to record discount allowed and discount received. In double column cash book, transactions of cash receipts and payments are recorded along with cash discount allowed or received, if any.

Double column cash book may have the following columns:

• Cash and discount column; or
• Bank and discount column; or
• Cash and bank columns.

Format:

(3) Triple Column Cash Book: This type of cash book is similar to the cash book having cash and bank columns and one additional column on each side is provided for recording discount. As discount is a nominal account discount allowed while receiving payments is written on the debit side and discount received while making payments is written on the credit side.

While balancing, cash columns and bank columns are balanced but discount columns are merely totaled but not balanced.

Format:

(4) Petty Cash book: Petty cash book is the book which is used for the purpose of recording expenses involving small amounts. In a business besides large payments a number of small payments, such as for conveyance, stationery, cartage etc. have to be made. These payments are generally repetitive in nature. This book is prepared to make a record of petty expenses.

Q.14 What is contra entry? How can you deal this entry while preparing double column cash book?

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When cash is deposited into the bank or when cash is withdrawn from the bank for use in the office, each such transaction affects both ‘Cash Column’ as well as ‘Bank Column’ and the transaction is therefore recorded on both sides of the cash book. Such entries the double entry of which is complete in the Cash book itself are called ‘Contra entries’.

(a) Cash deposited into bank: When cash is deposited into the bank, it increases the bank balance and reduces the cash balance. Hence, it affects the Cash Column as well as the Bank Column. As such the same amount is recorded on the debit side as well as on the credit side. On the Dr. side ‘To Cash a/c’ is written and the amount is recorded in the bank column. On the Cr. side ‘By Bank A/c’ is written and the amount is recorded in the Cash Column.

For example, If we deposit 3,000 into the bank, it will be recorded in the cash book as follows:

(b) Cash withdrawn from Bank for office use: In this case, the cash balance is increased and the bank balance is reduced. On the Dr. Side ‘To Bank A/c’ is written and the amount is recorded in Cash Column. On the Cr. side ‘By Cash A/c’ is written and the amount is recorded in Bank Column.

For example, if we withdrew 1,500 from the bank, it will be recorded in the cash book as follows:

Cash book itself serves as the cash account and bank account. In order to indicate that these entries are not be posted to the ledger, the word “C” which stands for contra, is written on both sides in L.F. Column.

Q.15 What is petty cash book? Write the advantages of petty cash book?

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Petty cash book is the cash book in which expenses involving small amount like postage, stationery, bus fare, taxi fare, cartage etc. are recorded.

Advantages of Petty Cash Book:

• Saving of Time and efforts of chief cashier: As petty cashier handles the work of making all petty expenses and recording them as well, a lot o time and energy of the main cashier is saved.
• Easiness in Posting: Only the total of each head of expense is posted into the ledger. As such a lot of space is saved and the posting becomes very convenient.
• Easiness in preparing the cash book: As the number of small payments in every business is quite large and as these are recorded in the petty cash book itself, the main cash book is not overburdened and can be more easily totaled.
• Control on petty expenses: The main cashier keeps checking the petty cash book from time to time and a proper check is put on any unnecessary expenditure.
• Lesser chances of fraud: Petty cashier obtains a receipt of every payment made by him and keeps a proper record of them. The receipts are duly signed by the main cashier while reimbursing the amount to the petty cashier. As such, it minimises the chances of fraud.
• Simple method: The maintenance of petty cash book does not require any specialised knowledge of accounting.

Q.16 Describe the advantages of sub-dividing the journal.

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Sub-division of the journal into various books for recording transactions of similar nature is called sub-division of journal.

Advantages of sub-division of journal:

• Division of work according to ability: Since there will be eight subsidiary books in place of one journal, the accounting work can be divided among different persons according to their ability
• Increase in efficiency: Because each person is entrusted the work of a particular book over a period of time, he becomes efficient in handling it. This will lead to the work being completed quickly and more accurately.
• Easiness in Posting: Since all transactions of a particular nature are already collected at one place, it facilitates the posting into the ledger. For example, all credit purchase are collected in purchase book and only the total of purchase book is to be posted to the purchase account in the ledger.
• Easiness in Checking: In case the trial balance does not agree, the existence of separate books helps in the detection of errors quickly.
• Protection from frauds: If only one book i.e., journal is maintained; only one person will be incharge of it. In such a case it is easier to commit a fraud. By the use of subsidiary books the work is divided among various persons, as such as the possibility of forgery and manipulation is greatly reduced.
• Full information at one place: By the use of subsidiary books classified information in the form of cash receipts, cash payments, cash balance, credit purchases, credit sales etc. is readily available at one place. Such information helps the management in day to day decision making.
• Flexible: It is not necessary for every business firm to use all the eight books. The number of books can be increased or decreased according to the needs of the particular business.
• Fixation of Responsibility: Each employee is entrusted with a particular subsidiary book and as such he can be held responsible for the errors committed in that very book.

Q.17 What do you understand by balancing of account?

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Accounts in the ledger are periodically balanced, generally at the end of the accounting period, with the object of ascertaining the net position of each amount. Balancing of an account means that the two sides are totaled and the difference between them is shown on the side, which is shorter in order to make their totals equal.

The words ‘balance c/d’ are written against the amount of the difference between the two sides. The amount of balance is brought (b/d) down in the next accounting period indicating that it is a continuing account, till finally settled or closed.

In case the debit side exceeds the credit side, the difference is written on the credit side, if the credit side exceeds the debit side, the difference between the two appears on the debit side and is called debit and credit balance respectively.

The accounts of expenses losses and gains/ revenues are not balanced but are closed by transferring to trading and profit and loss account.

Q.18 Enter the following transactions in a simple cash book for December 2016:

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Q.19

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

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Q.20 Enter the following transaction in Simple cash book for December 2017:

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Q.21

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

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Note: In case when Cash and Bank both are recorded, there will be a contra entry and ‘C’ will be written in (L.F) column.

Q.22 Prepare a double column cash book with the help of following information for December 2016:

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Q.23 Enter the following transactions in double column cash book of M/s Ambica Traders for July 2017:

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Q.24 Prepare double column cash book from the following information for July 2017:

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Q.25 Enter the following transaction in a double column cash book of M/s Mohit Traders for January 2017:

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Q.26 Prepare double column cash book from the following transactions for the year August 2017:

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Q.27 M/s Ruchi Traders started their cash book with the following balances 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:

Prepare bank column cash book.

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Q.28 Prepare petty cash book from the following transactions. The imprest amount is 2,000.

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Q.29 Record the following transactions during the week ending Dec. 30, 2017 with a weekly imprest 500.

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Q.30 Enter the following transactions in the Purchase Journal of M/s Gupta Traders of July 2017:
July 01:
Bought from Rahul Traders as per invoice no. 20041
40 Registers @ 60 each
80 Gel pens @ 15 each
50 note books @ 20 each
Trade discount 10%

July 15:
Bought from Global Stationers as per invoice no. 1132
40 Ink Pads @ 8 each
50 files @ 10 each
20 Color Books @ 20 each
Trade Discount 5%

July 23:
Purchased from Lamba Furniture as per invoice no. 3201
2 chairs @ 600 per chair
1 table @ 1,000 per table

July 25:
Bought from Mumbai Traders as per invoice no. 1111
10 Paper Rim @ 100 per rim
400 drawing sheets @ 3 each
20 Packets waters colour @ 40 per packet

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Working Notes:

Note: Purchase of Lamba Furniture will not be part of Purchase Journal as it is Purchase of Capital Goods.

Q.31 Enter the following transactions in sales (journal) book of M/s Bansal electronics of September, 2014:
September 01:
Sold to Amit Traders as per bill no. 4321
20 pocket Radio @ 70 per Radio
2, T.V. set, B&W (6”) @ 800 per T.V.
10 Sold to Arun Electronics as per bill no. 4351
5 T.V. sets (20’’) B&W @ 3000 per T.V
2 T.V. sets (21”) Colour @ 4,800 per T.V.

September 22:
Sold to Handa Electronics as per bill no. 4399
10 tape recorders @ 600 each
5 Walkman @ 300 per each

September 28:
Sold to Harish Trader as per bill no. 4430
10 Mixed Juicer Grinders @ 800 each

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Working Notes:

Q.32 Prepare a purchase return (journal) book from the following transactions for April 2017:

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Q.33 Prepare Return Inward Journal (book) from the following transactions of M/s Bansal Electronics for July 2017:

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Q.34 Prepare proper subsidiary books and post them to the ledger from the following transactions for the month of February 2017:

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Q.35 The following balances of ledger of M/s Marble Traders on April 01, 2017

Journalise the above transactions and post them to the ledger.

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