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Recording of Transactions - II

NCERT Class 11 · Accountancy Based on NCERT Class 11 Accountancy textbook · Free CBSE study kit

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Chapter Notes

Overview
This chapter introduces special purpose subsidiary books (daybooks) that replace the general journal for repetitive transactions, making recording efficient and enabling division of labour. It covers the Cash Book (single, double, and petty cash), Purchases Book, Purchases Return Book, Sales Book, Sales Return Book, and Journal Proper. The one big idea is that every transaction of a similar nature is recorded in a dedicated book, and the cash book serves as both a journal and a ledger for cash and bank accounts.
Key Concepts (22)
Special Journals / Subsidiary Books / Daybooks
Books meant for recording all transactions of a similar nature, such as cash transactions, credit sales, or credit purchases.
e.g. All credit sales are recorded in the Sales Book, not in the general journal.
Cash Book
A book in which all transactions relating to cash receipts and cash payments are recorded. It serves the purpose of both journal and ledger (cash) account and is also called the book of original entry.
e.g. M/s Roopa Traders records all cash receipts on the debit side and all cash payments on the credit side of the Cash Book.
Single Column Cash Book
A cash book that contains only one amount column on each (debit and credit) side, used when all receipts and payments are made in cash.
e.g. If a business only deals in cash, it uses a single column cash book with one 'Amount' column on each side.
Double Column Cash Book
A cash book with two amount columns on each side — one for cash and one for bank transactions.
e.g. M/s Tools India records cash receipts in the cash column and cheque deposits in the bank column on the debit side.
Contra Entry
An entry that appears on both sides of the cash book when cash is deposited into the bank or withdrawn from the bank for office use. It is marked with 'C' in the L.F. column and is not posted to the ledger.
e.g. When cash of ₹10,000 is deposited into the bank, it is recorded on the debit side (bank column) and on the credit side (cash column) with 'C' in the L.F. column.
Petty Cash Book
A separate cash book maintained by a petty cashier to record small repetitive payments such as conveyance, postage, and cartage.
e.g. Mr. Mohit, the petty cashier of M/s Samaira Traders, records auto fare, courier services, and postal stamps in the petty cash book.
Imprest System
A system under which a fixed sum (imprest amount) is given to the petty cashier at the beginning of a period. When most of it is spent, the petty cashier is reimbursed the exact amount spent, restoring the imprest amount.
e.g. Mr. Mohit receives ₹2,000 on May 1. He spends ₹1,487 during the month and is reimbursed ₹1,487 on May 31, so he again has ₹2,000 at the start of June.
Purchases (Journal) Book
A special journal used to record all credit purchases of goods (merchandise). Cash purchases are recorded in the cash book, and purchases of assets are recorded in the journal proper.
e.g. M/s Kanika Traders records credit purchases from Neema Electronics in the Purchases Book.
Purchases Return (Journal) Book / Return Outwards Book
A special journal used to record the return of goods previously purchased on credit. The source document is a debit note.
e.g. When defective mini T.V.s are returned to Neema Electronics, the entry is made in the Purchases Return Book.
Sales (Journal) Book
A special journal used to record all credit sales of merchandise. Cash sales are recorded in the cash book.
e.g. M/s Koina Supplies records credit sales to Raman Traders in the Sales Book.
Sales Return (Journal) Book / Return Inwards Book
A special journal used to record the return of goods by customers who had purchased on credit. The source document is a credit note.
e.g. When Raman Traders returns a defective water purifier, the entry is made in the Sales Return Book.
Journal Proper
The journal used to record transactions that cannot be recorded in any special journal, such as credit purchases of assets, opening entries, closing entries, and rectification entries.
e.g. Purchase of office furniture on credit is recorded in the Journal Proper.
Debit Note
A document prepared by the buyer (purchaser) when goods are returned to the supplier, evidencing a debit to be raised against the supplier.
e.g. Kanika Traders prepares a debit note when returning defective goods to Neema Electronics.
Credit Note
A document prepared by the seller when goods are received back from a customer, evidencing a credit to be given to the customer.
e.g. Koina Suppliers prepares a credit note when Raman Traders returns a defective water purifier.
Pay-in-Slip
A form used to deposit cash or cheques into a bank account. It contains a counterfoil returned to the depositor as a receipt.
e.g. A businessman fills a pay-in-slip to deposit ₹15,000 cash into his current account.
Cheque
A negotiable instrument issued by the bank to the account holder for withdrawing money. It can be bearer or order, and may be crossed for safety.
e.g. A crossed cheque with 'A/c Payee only' ensures the amount is deposited only in the named person's account.
Crossing of Cheque
Drawing two parallel lines across the cheque, which restricts payment to be made only through a bank, not over the counter.
e.g. A cheque with two parallel lines and '& Co.' written between them is a general crossing.
Overdraft
A situation when cash withdrawn from the bank exceeds the amount of deposit, resulting in a credit balance in the bank column of the cash book.
e.g. M/s Laser Zone has a bank overdraft of ₹3,200 on January 1, 2017.
Dishonour of Cheque
Return of a cheque unpaid by the bank, generally due to insufficient funds in the customer's account.
e.g. When Kumar's cheque is dishonoured, M/s Tools India records the amount on the credit side of the cash book in the bank column.
Endorsement
Writing instructions on the back of a cheque to pay it to a particular person, followed by signing it, used to transfer an order cheque.
e.g. If a payee writes 'Pay to Ramesh' on the back of an order cheque and signs it, that is an endorsement.
Incidental Charges
Small charges levied by the bank for services rendered on a current account, as no interest is paid on the balance.
e.g. Bank charges of ₹300 debited to the firm's account are recorded on the credit side of the cash book in the bank column.
Trade Discount
A reduction in the list price of goods allowed by the seller to the buyer, not recorded in the books; entries are made with the net amount.
e.g. In the Purchases Book, a 10% trade discount is deducted before recording the invoice amount.
Formulas & Equations (5)
Total of Purchases Book = Sum of all credit purchases (net of trade discount)
Reads as: The total of the purchases book equals the sum of all credit purchases after deducting trade discount.
Variables: Each entry is the net invoice amount (list price minus trade discount).
Use when: When posting the monthly total to the debit of the Purchases Account in the ledger.
⚠ Students include trade discount in the amount column instead of recording only the net amount.
Total of Sales Book = Sum of all credit sales (net of trade discount)
Reads as: The total of the sales book equals the sum of all credit sales after deducting trade discount.
Variables: Each entry is the net invoice amount.
Use when: When posting the monthly total to the credit of the Sales Account in the ledger.
⚠ Students forget to deduct trade discount before recording the sale.
Imprest Amount = Opening float given to petty cashier
Reads as: The imprest amount is the fixed sum given to the petty cashier at the start of the period.
Variables: Imprest amount = fixed sum (e.g., ₹2,000). Reimbursement = total amount spent during the period.
Use when: When operating the petty cash book under the imprest system.
⚠ Students think the reimbursement brings the balance to zero, but it restores the imprest amount.
Balance c/d (Cash Book) = Total Receipts - Total Payments
Reads as: The closing balance carried down equals total receipts minus total payments.
Variables: Total Receipts = opening balance + all receipts during the period. Total Payments = all payments during the period.
Use when: When balancing the cash book at the end of the period.
⚠ Students forget to include the opening balance in total receipts.
Net Invoice Amount = List Price - Trade Discount
Reads as: The net invoice amount equals list price minus trade discount.
Variables: List Price = catalogue price. Trade Discount = percentage reduction on list price.
Use when: When recording entries in Purchases Book or Sales Book.
⚠ Students record the list price instead of the net amount after trade discount.
How It Works
Recording in Single Column Cash Book
  1. Step 1: Enter the opening cash balance on the debit side under 'Balance b/d'.
  2. Step 2: Record all cash receipts on the debit side with date, particulars, L.F., and amount.
  3. Step 3: Record all cash payments on the credit side with date, particulars, L.F., and amount.
  4. Step 4: Total both sides and find the difference. Enter the difference as 'Balance c/d' on the credit side to make totals equal.
  5. Step 5: Bring down the closing balance as 'Balance b/d' on the debit side for the next period.
💡 The cash book always has a debit balance because cash payments can never exceed cash receipts plus opening balance.
Recording in Double Column Cash Book
  1. Step 1: Enter opening cash and bank balances on the debit side in their respective columns.
  2. Step 2: Record cash receipts in the cash column and bank receipts (cheques deposited) in the bank column on the debit side.
  3. Step 3: Record cash payments in the cash column and bank payments (cheques issued) in the bank column on the credit side.
  4. Step 4: For contra entries (cash deposited into bank or cash withdrawn from bank), record on both sides with 'C' in the L.F. column.
  5. Step 5: Balance both columns separately. The bank column may have a credit balance (overdraft).
💡 Contra entries are not posted to the ledger. Dishonoured cheques are recorded on the credit side in the bank column.
Operating Petty Cash Book under Imprest System
  1. Step 1: Head cashier gives a fixed imprest amount to the petty cashier at the start of the period.
  2. Step 2: Petty cashier makes small payments out of this amount, recording each in the petty cash book with date, voucher number, particulars, and amount.
  3. Step 3: At the end of the period, total the amount paid column and the analysis columns (postage, conveyance, etc.).
  4. Step 4: The difference between total receipts and total payments is the balance with the petty cashier.
  5. Step 5: Petty cashier is reimbursed the exact amount spent, restoring the imprest amount for the next period.
💡 The petty cash account in the ledger is debited with the imprest amount and credited with the total expenditure. Each expense account is debited with its column total.
Recording in Purchases Book and Posting
  1. Step 1: Record each credit purchase of goods in the Purchases Book with date, invoice number, supplier's name, L.F., and net amount (after trade discount).
  2. Step 2: Daily, post the individual amounts to the credit of each supplier's account in the ledger.
  3. Step 3: At the end of the month, total the Purchases Book.
  4. Step 4: Post the monthly total to the debit of the Purchases Account in the ledger.
💡 Only credit purchases of goods (merchandise) are recorded here. Cash purchases go in the cash book; asset purchases go in the journal proper.
Recording in Sales Book and Posting
  1. Step 1: Record each credit sale of goods in the Sales Book with date, invoice number, customer's name, L.F., and net amount (after trade discount).
  2. Step 2: Daily, post the individual amounts to the debit of each customer's account in the ledger.
  3. Step 3: At the end of the month, total the Sales Book.
  4. Step 4: Post the monthly total to the credit of the Sales Account in the ledger.
💡 Only credit sales of merchandise are recorded. Cash sales go in the cash book.
Recording in Purchases Return Book and Posting
  1. Step 1: When goods are returned to a supplier, prepare a debit note in duplicate and send the original to the supplier.
  2. Step 2: Record the return in the Purchases Return Book with date, debit note number, supplier's name, L.F., and amount.
  3. Step 3: Post the individual amount to the debit of the supplier's account in the ledger.
  4. Step 4: At the end of the period, total the Purchases Return Book and post the total to the credit of the Purchases Return Account.
💡 The source document is a debit note. The supplier's account is debited, and the purchases return account is credited.
Recording in Sales Return Book and Posting
  1. Step 1: When goods are returned by a customer, prepare a credit note in duplicate and send the original to the customer.
  2. Step 2: Record the return in the Sales Return Book with date, credit note number, customer's name, L.F., and amount.
  3. Step 3: Post the individual amount to the credit of the customer's account in the ledger.
  4. Step 4: At the end of the period, total the Sales Return Book and post the total to the debit of the Sales Return Account.
💡 The source document is a credit note. The customer's account is credited, and the sales return account is debited.
Exam Traps — Don't Make These Mistakes
⚠ Confusing Cash Book with Cash Account
✗ Students write 'Cash Account' in the ledger and post entries from the cash book to it.
→ When a cash book is maintained, no separate cash account is opened in the ledger because the cash book itself serves as the cash account.
✓ State clearly: 'When a cash book is maintained, a separate cash account is not opened in the ledger. The cash book serves as both journal and ledger for cash transactions.'
⚠ Posting Contra Entries to Ledger
✗ Students post the 'C' marked contra entries (cash deposited into bank or cash withdrawn) to the cash account and bank account in the ledger.
→ Contra entries affect both cash and bank within the cash book itself. They are marked 'C' to indicate they should be ignored while posting to the ledger, as both aspects are already recorded in the cash book.
✓ Do not post contra entries to any ledger account. They are only recorded in the cash book with 'C' in the L.F. column.
⚠ Recording Trade Discount in the Books
✗ Students record the list price in the Purchases Book or Sales Book and then show trade discount as a separate deduction.
→ Trade discount is not recorded in the books. Only the net amount (list price minus trade discount) is entered in the subsidiary books.
✓ Calculate the net amount after deducting trade discount and record only that net amount in the Purchases Book or Sales Book.
⚠ Treating Cash Purchases as Purchases Book Entry
✗ Students record cash purchases of goods in the Purchases Book.
→ The Purchases Book is only for credit purchases of goods. Cash purchases are recorded in the cash book on the payments side.
✓ Record cash purchases in the cash book (credit side). Record only credit purchases in the Purchases Book.
⚠ Balancing Petty Cash Book Incorrectly
✗ Students show the closing balance as the imprest amount minus total payments, but then forget to bring it down or treat reimbursement as income.
→ The closing balance is carried down, and the reimbursement is the exact amount spent, not additional income. The petty cash account is debited with the imprest amount and credited with total expenses.
✓ Balance c/d = Imprest amount - Total payments. Reimbursement = Total payments. The petty cash account is debited with the imprest amount and credited with the total of expenses.
⚠ Recording Dishonoured Cheque on Debit Side
✗ When a cheque is dishonoured, students record the amount on the debit side of the cash book in the bank column.
→ Dishonour of a cheque reverses the earlier entry. The earlier deposit increased the bank balance (debit side). Dishonour decreases it, so it must be recorded on the credit side in the bank column.
✓ Record the dishonoured cheque on the credit side of the cash book in the bank column, with the customer's name in the particulars column.
Compare & Contrast
Number of amount columns on each side
Single Column Cash Book
Double Column Cash Book
Single column cash book has only one amount column (for cash) on each side, while double column cash book has two amount columns (cash and bank) on each side.
Type of transaction recorded
Purchases Book
Sales Book
Purchases Book records all credit purchases of goods (merchandise), while Sales Book records all credit sales of goods (merchandise).
Who prepares it and purpose
Debit Note
Credit Note
A debit note is prepared by the buyer (purchaser) when returning goods to the supplier, while a credit note is prepared by the seller when goods are returned by the customer.
Direction of return
Purchases Return Book
Sales Return Book
Purchases Return Book records goods returned by the business to its suppliers (return outwards), while Sales Return Book records goods returned by customers to the business (return inwards).
Exam Focus
Marks pattern: 2 MCQs (1 mark each), 1 Very Short Answer (1 mark), 1 Short Answer (3 marks) on cash book or petty cash book, 1 Long Answer (5 marks) on preparation of double column cash book or subsidiary books with ledger posting.
Most asked: Preparation and balancing of Single and Double Column Cash Book · Contra entries and their treatment · Petty Cash Book under Imprest System · Recording in Purchases Book and Sales Book with trade discount · Posting from subsidiary books to ledger
Don't skip: Prepare a double column cash book with contra entries, bank charges, dishonour of cheque, and overdraft.; Prepare a petty cash book under the imprest system with analysis columns and show ledger posting.; Record transactions in Purchases Book, Sales Book, and their return books, and post to ledger.
One-Line Revision (read aloud before the exam)
  1. Special journals (subsidiary books) are used to record repetitive transactions of a similar nature, making accounting efficient and enabling division of labour.
  2. Cash book records all cash receipts and payments and serves as both journal and ledger for cash and bank accounts.
  3. Single column cash book has one amount column on each side; double column cash book has cash and bank columns on each side.
  4. Contra entries (cash deposited into bank or cash withdrawn for office) are marked 'C' and not posted to the ledger.
  5. Petty cash book under the imprest system involves giving a fixed imprest amount to the petty cashier and reimbursing the exact amount spent.
  6. Purchases Book records only credit purchases of goods; cash purchases are recorded in the cash book.
  7. Sales Book records only credit sales of goods; cash sales are recorded in the cash book.
  8. Purchases Return Book uses a debit note as source document; the supplier's account is debited and purchases return account is credited.
  9. Sales Return Book uses a credit note as source document; the customer's account is credited and sales return account is debited.
  10. Trade discount is not recorded in the books; only the net amount after trade discount is entered in subsidiary books.
  11. Journal Proper records transactions that cannot be recorded in any special journal, such as credit purchases of assets and opening entries.
  12. When a cheque is dishonoured, it is recorded on the credit side of the cash book in the bank column.
  13. Bank column in the cash book can have a credit balance (overdraft), but cash column always has a debit balance.
  14. The monthly total of Purchases Book is posted to the debit of Purchases Account; the total of Sales Book is posted to the credit of Sales Account.
  15. A debit note is prepared by the buyer when returning goods; a credit note is prepared by the seller when goods are returned by the customer.

MCQs — 10 Questions with Answers

Q1. Which of the following is the primary reason for maintaining special purpose books?

  • A. To reduce congestion in the journal and enable division of labour in accounting work ✓
  • B. To replace the ledger entirely
  • C. To eliminate the need for a trial balance
  • D. To increase the number of ledger accounts

Answer: A — Special purpose books classify repetitive transactions by type, reducing journal entries and allowing multiple people to record transactions simultaneously.

Q2. In a single column cash book, if cash is received from a debtor Rajesh, on which side does this entry appear?

  • A. Credit side, and Rajesh's account is debited in the ledger
  • B. Debit side, and Rajesh's account is credited in the ledger ✓
  • C. Credit side, and Rajesh's account is credited in the ledger
  • D. Debit side, and Rajesh's account is debited in the ledger

Answer: B — Cash receipts appear on the debit side of the cash book; the corresponding account (debtor) is credited in the ledger to reduce the receivable.

Q3. What is the double entry for paying rent of ₹5,000 in cash using a single column cash book?

  • A. Dr. Cash Book; Cr. Rent Account
  • B. Dr. Rent Account; Cr. Cash Book ✓
  • C. Dr. Cash Account; Cr. Rent Account
  • D. Dr. Rent Account; Cr. Bank Account

Answer: B — Rent expense is debited and cash (cash book) is credited; the cash book entry on the credit side automatically reflects the decrease in cash.

Q4. Which of the following statements about the cash book is INCORRECT?

  • A. Cash book serves as both a journal and a ledger
  • B. Cash book requires posting to a separate Cash account in the ledger ✓
  • C. Balance b/d in the cash book represents opening cash
  • D. The debit side of the cash book shows cash receipts

Answer: B — The cash book itself IS the cash (and bank) account in the ledger; no separate posting to a Cash account is required, which is a key distinction from the journal.

Q5. A business has cash receipts of ₹50,000 and cash payments of ₹35,000 during a month. If the opening balance was ₹8,000, what is the closing balance?

  • A. ₹15,000
  • B. ₹23,000 ✓
  • C. ₹27,000
  • D. ₹85,000

Answer: B — Closing balance = Opening balance + Receipts - Payments = ₹8,000 + ₹50,000 - ₹35,000 = ₹23,000.

Q6. In a double column cash book, cheques received are recorded in which column?

  • A. Cash column on the debit side
  • B. Bank column on the debit side ✓
  • C. Cash column on the credit side
  • D. A separate cheque register, not in the cash book

Answer: B — Cheques (or bank deposits) are recorded in the Bank column since they represent money received through the bank, not physical cash.

Q7. Which document is issued by a bank to the depositor as proof of cash/cheque deposit?

  • A. Cheque
  • B. Pay-in-slip counterfoil ✓
  • C. Bank passbook
  • D. Deposit slip original

Answer: B — The counterfoil of the pay-in-slip, signed by the bank cashier, serves as the depositor's receipt for cash or cheque deposits.

Q8. When goods are purchased on credit from supplier Mohit for ₹10,000, why is this NOT recorded in the cash book?

  • A. Because credit purchases must go directly to the ledger
  • B. Because no cash or cheque is exchanged; credit purchases are recorded in the Purchases Book ✓
  • C. Because the Purchases Book is a journal, not a special purpose book
  • D. Because the transaction involves three parties

Answer: B — The cash book only records transactions involving actual cash or bank transfers; credit purchases are recorded in the Purchases Book and later posted to the ledger.

Q9. Given: Opening balance ₹20,000, total debit side entries ₹45,000, total credit side entries (excluding balance c/d) ₹32,000. Calculate balance c/d.

  • A. ₹25,000
  • B. ₹33,000 ✓
  • C. ₹37,000
  • D. ₹12,000

Answer: B — Balance c/d = Opening balance + Total receipts (debits) - Total payments (credits) = ₹20,000 + ₹45,000 - ₹32,000 = ₹33,000.

Q10. Which of the following transactions would require posting to the ledger after recording in the cash book? (A) Cash receipt from sales; (B) Payment of rent in cash; (C) Cheque deposited in bank; (D) None of the above, as the cash book is both journal and ledger.

  • A. A and B only
  • B. B and C only
  • C. A, B, and C
  • D. None — the cash book does not require posting to the ledger ✓

Answer: D — The cash book itself serves as the cash and bank account in the ledger; entries are not posted elsewhere, unlike the general journal entries which must be posted to individual accounts.

Flashcards

What is a special purpose book?

A subsidiary book designed to record transactions of a similar nature (e.g., all cash receipts and payments in the cash book) to reduce journal congestion and enable division of labour.

Why is the cash book considered both a journal and a ledger?

It serves as the book of original entry (journal function) and also maintains the cash account balance (ledger function), eliminating the need for a separate cash account in the ledger.

In a single column cash book, what does the debit side represent?

Cash receipts or inflows — money received by the business from various sources.

When posting a cash receipt from a customer to the ledger, which side of the customer's account is credited?

The credit side, because the debit side of the cash book shows cash received means the customer's account balance is reduced (liability decreases).

What is the main advantage of a double column cash book over a single column cash book?

It separately records cash and bank transactions in two columns, allowing efficient handling of both mediums without confusion.

Define a pay-in-slip in the context of banking.

A form filled to deposit cash or cheques into a bank account; the counterfoil is returned to the depositor as proof of deposit.

What does 'balance c/d' mean in the cash book?

Balance carried down — the closing cash balance at the end of the period, which becomes the opening balance (balance b/d) for the next period.

Which transactions are NOT recorded in special purpose books?

Transactions that do not fit the classification of any special purpose book are recorded in the Journal Proper.

If a payment for rent is made in cash, which account is debited in the ledger after posting from the cash book?

The Rent account is debited, because rent payment appears on the credit (payment) side of the cash book.

What is the significance of 'L.F.' column in the cash book?

L.F. stands for Ledger Folio and records the page number of the ledger account to which each transaction is posted, enabling easy reference.

Important Board Questions

Define a special purpose book. Give one example and explain why a business maintains such books. [2 marks]

State that special purpose books record similar transactions; give an example (e.g., cash book for cash transactions). Reason: reduces journal congestion and enables division of labour.

Explain the posting of entries from the cash book to the ledger. Give an example of how a cash receipt from a debtor is posted and how a cash payment for expenses is posted. [5 marks]

Clarify that debit side entries (receipts) result in crediting the related accounts, and credit side entries (payments) result in debiting the related accounts. Show with a numerical example: if ₹5,000 is received from debtor X, debit cash book and credit X's account; if ₹2,000 is paid for rent, credit cash book and debit Rent account.

Prepare a single column cash book for M/s Sharma Enterprises from the following transactions for the month of March 2024, and identify which accounts will be credited and which will be debited when posting to the ledger: Opening balance ₹15,000 (Mar. 1); received from customer Priya ₹8,000 (Mar. 5); paid for purchases ₹6,500 (Mar. 10); sold goods for cash ₹12,000 (Mar. 15); paid salary ₹4,000 (Mar. 20); received from customer Arun ₹7,500 (Mar. 25); paid electricity bill ₹1,200 (Mar. 28). Balance the cash book and explain the double entry principle applied. [6 marks]

Prepare cash book with debit (opening balance, sales, customer receipts totalling ₹42,500) and credit sides (purchases ₹6,500, salary ₹4,000, electricity ₹1,200, balance c/d ₹30,800, totalling ₹42,500). Explain: Priya's account is credited (₹8,000), Arun's account is credited (₹7,500), Sales account is credited (₹12,000), Purchases account is debited (₹6,500), Salary account is debited (₹4,000), Electricity account is debited (₹1,200).

Assertion-Reason Questions for Recording of Transactions - II

Q1. Assertion (A):

A Cash Book serves the purpose of both a journal and a ledger account for cash transactions.

Reason (R):

When a Cash Book is maintained, transactions of cash are not recorded separately in the journal, and no separate account for cash is required in the ledger.

Answer: A — Both A and R are true, and R is the correct explanation of A — Both the assertion and reason are true, and the reason correctly explains why the assertion is valid. The Cash Book's dual nature eliminates the need for separate journal entries and a cash account in the ledger, making it a unique record that combines both functions.

Q2. Assertion (A):

Special purpose books are also called daybooks or subsidiary books.

Reason (R):

They are specially designed to record all types of transactions in a single comprehensive record.

Answer: C — A is true but R is false — The assertion is true—special purpose books are indeed called daybooks or subsidiary books. However, the reason is false because special purpose books are NOT designed to record all types of transactions together; instead, they record specific similar transactions separately. The reason does not correctly explain why they are called daybooks/subsidiary books; rather, they are called such because they support the main journal and ledger system.

Q3. Assertion (A):

In a double column cash book, the debit side of the bank column records all bank deposits and cheques received.

Reason (R):

Bank deposits increase the bank balance, which is why they are recorded on the debit side following the principle that increases in assets are debits.

Answer: A — Both A and R are true, and R is the correct explanation of A — Both the assertion and reason are true, and the reason correctly explains the assertion. Bank is an asset, and increases in assets are recorded on the debit side. Deposits and cheques received increase the bank balance, hence they appear on the debit side of the bank column.

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Case-Based Questions (CBQ) for Recording of Transactions - II

Case Study:

M/s Priya & Co., a partnership firm with partners Priya and Kavita sharing profits in the ratio 3:2, maintains a three-column cash book. On 15th November 2024, the firm received a cheque of ₹12,000 from a debtor, Rohan, in full settlement of his account of ₹12,500. The cheque was deposited into the bank on the same day. On 18th November, the bank credited the firm's account with interest of ₹800.

Q1. What is the correct entry in the cash book for the discount allowed to Rohan on 15th November?

  • A. Debit Discount Allowed A/c ₹500, Credit Cash Book ₹500
  • B. Record ₹500 in the discount column on the debit side of the cash book
  • C. Record ₹500 in the discount column on the credit side of the cash book ✓
  • D. No entry for discount as it is not a cash transaction

Answer: C

Q2. On 15th November, the cheque received from Rohan is recorded in which column of the cash book?

  • A. Cash column on the debit side
  • B. Bank column on the debit side ✓
  • C. Bank column on the credit side
  • D. Cash column on the credit side

Answer: B

Q3. The bank interest of ₹800 credited on 18th November will be recorded in the cash book as:

  • A. Debit bank column ₹800, Credit interest income column ₹800 ✓
  • B. Debit bank column ₹800, Credit cash column ₹800
  • C. Debit bank column on debit side ₹800, and no corresponding entry
  • D. Debit bank column ₹800 on debit side, and record ₹800 in the bank column on credit side

Answer: A

Q4. If the partnership deed requires that discount allowed is to be borne by partners in their profit-sharing ratio, what is Kavita's share of the discount allowed on this transaction?

  • A. ₹200 ✓
  • B. ₹300
  • C. ₹500
  • D. ₹250

Answer: A

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