Tag: explain the purpose of maintaining a cash book

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Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Which of the following is/are features of cash book?

  1. It performs the functions of both journal and ledger at the same time.

  2. Cash receipts are recorded in the credit side and cash payments are recorded in the debit side.

  3. It records two aspect of transaction i.e. cash & credit.

  4. All of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The cash book is a book of original entry (journal) and also serves as the cash account (ledger). Option B is incorrect because receipts are debited and payments are credited. Option C is incorrect because it only records cash transactions, not credit transactions.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Rent due for the month of March will appear _______________.

  1. On the payment side of the cash book

  2. On the receipt side of the cash book

  3. Nowhere in the cash book

  4. As a contra entry
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Rent due is an outstanding expense and does not involve any actual cash inflow or outflow. Therefore, it is not recorded in the cash book; it is recorded in the journal proper.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Which of the following is the kind of a cash book?

  1. Single column cash book

  2. Double-column cash book

  3. Three-column cash book

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Cash books can be maintained in various formats depending on the needs of the business, including single-column (cash only), double-column (cash and discount, or cash and bank), and three-column (cash, bank, and discount) formats.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Which of the following statements is/are true?
(i) Cash book records all cash receipts and cash payments.
(ii) Cash book records all sale and purchase transactions of goods both in cash and on credit.
(iii) Cash book records discount on cash payments
Select the correct answer from the options given below :-

  1. Only (i) of the above

  2. Only (ii) of the above

  3. Only (iii) of the above

  4. Both (i) and (iii) of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Statement (i) is true because the cash book records cash receipts and payments. Statement (ii) is false because credit transactions are not recorded in the cash book. Statement (iii) is true because cash discounts allowed or received during cash transactions are recorded in the discount columns of a multi-column cash book.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

Cash column of a Cash-book may show a Debit or Credit Balance.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The cash column of a cash book can only show a debit balance (or a zero balance) because a business cannot pay out more physical cash than it has received. Only the bank column can show a credit balance (representing a bank overdraft).

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

State with reasons whether the following statement is true or false:
The balance in the Cash Book shows net income.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The balance in the Cash Book represents the cash and bank balances available at hand and in the bank at a specific point in time (assets). Net income is calculated in the Profit and Loss Account by comparing revenues and expenses, not by looking at the cash balance.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

The allowance made for promoting sales is called Cash discount.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The allowance made for promoting sales or encouraging bulk purchases is called a trade discount. A cash discount is offered to encourage prompt or early payment of cash.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

State with reasons whether the following statement is true or false:
Discount account should be balanced in the Cash Book.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The discount columns in a three-column cash book are not balanced. Instead, the total of the discount allowed column is debited to the Discount Allowed Account in the ledger, and the total of the discount received column is credited to the Discount Received Account in the ledger.

Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

In which book does the cash sales will be recorded?

  1. Cash Book

  2. Purchase Book

  3. General Journal

  4. Sales Book
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
Cash book is a journal in which all cash receipts and payments (including bank deposits and withdrawals) are recorded first, in chronological order, for posting to general ledger. Cash book is regularly reconciled with the bank statements as an internal auditing measure. It  is used to record all the receipts and payments of cash.
Multiple choice elements of book keeping and accountancy recording and posting of cash transactions explain the purpose of maintaining a cash book introduction, meaning and importance of cash book meaning and advantages of cash book

At the happening of below mentioned event what will happen. A cheque is deposited with bank.

  1. Bank pass book will be credited

  2. Bank pass book will be debited

  3. Bank's column in cask book is debited

  4. Bank's column in cask book is credited
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When a cheque is deposited, the business debits the bank column of its cash book to record the increase in its bank asset. Simultaneously, the bank will credit the customer's account in its pass book.