Recording of Transactions II Class 11: Cash Book and Special Purpose Books

What Recording of Transactions - II is about

Weightage: This chapter is part of Unit 2, Accounting Process (Part A: Financial Accounting-I), which carries 44 of the 80 theory marks in the school annual exam together with Recording of Transactions - I, Bank Reconciliation Statement, Trial Balance and Rectification of Errors, Depreciation and Provisions and Reserves.Source: CBSE Accountancy (055) syllabus 2026-27, Class XI course structure, Unit 2 Accounting Process

Key concepts

Special purpose books: meaning and advantages

NCERT section 4.1 to 4.6

Transactions of a similar kind are recorded in a separate book instead of the general journal. The usual books are:

Book	Records	Source document
Cash book	All cash and bank receipts and payments	Receipts, cash memos, cheque counterfoils, pay-in-slips
Purchases book	Credit purchases of goods only	Invoices received
Purchases return book	Goods returned to suppliers	Debit notes
Sales book	Credit sales of goods only	Copies of invoices issued
Sales return book	Goods returned by customers	Credit notes
Journal proper	Everything that does not fit the above	Vouchers

Advantages: division of work among clerks; specialisation and speed; fewer posting entries because totals are posted; easier checking and control; quick information (total credit sales of the month is one figure).

Worked example

In which book will each be recorded: (a) goods bought on credit from Asha; (b) furniture bought on credit from Bina; (c) goods sold for cash; (d) goods returned by Charu?

Try it first, then show the solutionSolution

1. (a) Credit purchase of goods: purchases book
2. (b) Credit purchase of an asset, not goods: journal proper
3. (c) Any cash transaction: cash book
4. (d) Return inward: sales return book

Answer: (a) Purchases book; (b) journal proper; (c) cash book; (d) sales return book.

Simple (single column) cash book

NCERT section 4.1.1

The simple cash book has one money column on each side. The left (debit) side records receipts ("To ..."), the right (credit) side records payments ("By ..."). It starts with the opening cash balance ("To Balance b/d") and is balanced like the Cash account: the cash book can never have a credit balance, because you cannot pay out more cash than you have.

Because it is the Cash account itself, no separate Cash account is kept in the ledger. Each entry is posted to the other account in the ledger on the opposite side: a receipt "To Sales A/c" in the cash book becomes "By Cash A/c" in the Sales account.

Simple Cash Book of Lina Florist, June 2026

Date	Receipts (Dr)	₹	Date	Payments (Cr)	₹
Jun 1	To Balance b/d	6,400	Jun 3	By Purchases A/c	14,000
Jun 6	To Sales A/c	26,500	Jun 10	By Wages A/c	7,200
Jun 14	To Kiran (debtor)	9,000	Jun 20	By Rent A/c	8,000
Jun 28	To Sales A/c	11,800	Jun 25	By Drawings A/c	3,500
			Jun 30	By Balance c/d	21,000
	Total	53,700		Total	53,700

Worked example

A simple cash book shows total receipts (with the opening balance) of ₹53,700 and total payments of ₹32,700. What is the closing balance and where is it written?

Try it first, then show the solutionSolution

1. Balance = 53,700 − 32,700 = ₹21,000
2. Written as "By Balance c/d" on the payments side; brought down as "To Balance b/d" next month

Answer: ₹21,000 cash in hand, a debit balance.

Cash book with a bank column and contra entries

NCERT section 4.1.2

When a business uses a bank account, a double column cash book keeps two amount columns on each side: Cash and Bank. Deposits and cheques received go in the Bank column on the receipts side; cheques issued and bank charges go in the Bank column on the payments side.

Contra entries: a transaction that affects both cash and bank appears on both sides of the same book, and "C" is written in the L.F. column, which means it is not posted to the ledger:

• Cash deposited into bank: Bank column (Dr side) and Cash column (Cr side).
• Cash withdrawn from bank for office use: Cash column (Dr side) and Bank column (Cr side).

Cash withdrawn from the bank for the owner's personal use is not contra: it is drawings, entered only in the Bank column on the payments side.

Both columns are balanced separately. The cash column always has a debit balance; the bank column can show a credit balance, which means an overdraft (the bank has allowed you to draw more than you deposited).

Cash Book of Dev Electricals (Cash and Bank columns)

Date	Receipts (Dr)	L.F.	Cash ₹	Bank ₹	Date	Payments (Cr)	L.F.	Cash ₹	Bank ₹
Jul 1	To Balance b/d		25,000	1,20,000	Jul 3	By Bank A/c	C	15,000
Jul 2	To Sales A/c		18,000		Jul 8	By Anil			30,000
Jul 3	To Cash A/c	C		15,000	Jul 10	By Purchases A/c		9,000
Jul 5	To Mohit			24,500	Jul 12	By Cash A/c	C		10,000
Jul 12	To Bank A/c	C	10,000		Jul 15	By Rent A/c			8,000
Jul 18	To Nisha		12,000		Jul 20	By Furniture A/c			22,000
Jul 31	To Cash A/c	C		17,000	Jul 24	By Salaries A/c		14,000
					Jul 27	By Drawings A/c		5,000
					Jul 29	By Bank Charges A/c			300
					Jul 31	By Bank A/c	C	17,000
					Jul 31	By Balance c/d		5,000	1,06,200
	Total		65,000	1,76,500		Total		65,000	1,76,500

Worked example

How is "withdrew ₹10,000 from bank for office use" entered in the cash book with a bank column?

Try it first, then show the solutionSolution

1. Cash increases: Cash column on the receipts side, "To Bank A/c 10,000", L.F. "C"
2. Bank decreases: Bank column on the payments side, "By Cash A/c 10,000", L.F. "C"

Answer: A contra entry on both sides, not posted to the ledger.

Petty cash book and the imprest system

NCERT section 4.1.3

Small, frequent payments (postage, stationery, conveyance, cartage, tea) would clutter the main cash book, so they are handled by a petty cashier.

Under the imprest system, the main cashier gives the petty cashier a fixed amount (the imprest) at the start of a period. The petty cashier makes small payments against vouchers. At the end of the period the main cashier reimburses the exact amount spent, so the petty cashier again starts with the full imprest.

The analytical petty cash book has a receipts column on the left, then date, voucher number, particulars and a total payments column, followed by one column for each kind of expense. At the end, each column is totalled, and the column totals are posted to the ledger expense accounts (Postage A/c Dr, Stationery A/c Dr and so on; Petty Cash A/c Cr), and the reimbursement is entered in the main cash book.

Advantages: saves the main cashier's time; better control over small expenses; easy to see spending by type; errors and fraud are limited to a small sum.

Petty Cash Book of Dev Electricals (imprest ₹5,000)

Receipts ₹	Date	V. No.	Particulars	Total paid ₹	Postage ₹	Stationery ₹	Conveyance ₹	Cartage ₹	Sundries ₹
5,000	Jul 1		To Cash (imprest from main cashier)
	Jul 2	1	By Postage stamps	250	250
	Jul 4	2	By Bus fare	120			120
	Jul 6	3	By Register and pens	480		480
	Jul 9	4	By Cartage on goods	350				350
	Jul 12	5	By Tea for staff	200					200
	Jul 15	6	By Courier charges	300	300
	Jul 19	7	By Taxi fare	600			600
	Jul 23	8	By Printer ink	750		750
	Jul 27	9	By Cartage on goods	400				400
	Jul 30	10	By Office cleaning	270					270
			Total	3,720	550	1,230	720	750	470
3,720	Jul 31		To Cash (reimbursement)
	Jul 31		By Balance c/d	5,000
8,720				8,720
5,000	Aug 1		To Balance b/d

Worked example

The imprest is ₹5,000 and the petty cashier spends ₹3,720 in July. How much is reimbursed and what is the opening petty cash on 1st August?

Try it first, then show the solutionSolution

1. Balance before reimbursement = 5,000 − 3,720 = ₹1,280
2. Reimbursement = amount spent = ₹3,720
3. Opening balance = ₹5,000 again

Answer: Reimbursed ₹3,720; opening balance on 1st August ₹5,000.

Purchases book and purchases return book (with GST)

NCERT section 4.2 and 4.3

The purchases book records only credit purchases of goods (items bought for resale). Cash purchases go to the cash book; credit purchase of furniture or machinery goes to the journal proper.

Columns: Date, Invoice No., Name of supplier, L.F., Details (items, quantity, rate, trade discount, GST), Total. In the analytical form there are separate columns for the purchase value, CGST, SGST and IGST. Entries are made at the net price after trade discount; GST is charged on that net price.

When goods are returned to a supplier, the buyer sends a debit note (telling the supplier that his account has been debited). The purchases return (return outwards) book records these returns with the same columns, reversing the GST.

Posting: each supplier's account is credited with the total of his invoice (goods + GST) on the date of purchase; at the end of the month, Purchases A/c is debited with the purchases column total and Input CGST, Input SGST and Input IGST with their column totals ("To Sundries as per Purchases Book"). For returns, each supplier is debited and Purchases Return A/c and the input tax accounts are credited with the totals.

Purchases Book of Dev Electricals

Date	Invoice No.	Name of supplier	Details	Total ₹	Purchases ₹	CGST ₹	SGST ₹	IGST ₹
Jul 4	ST-118	Sen Traders, Jaipur	10 fans @ ₹2,500 = 25,000; 5 coolers @ ₹6,000 = 30,000; Less: trade discount 10% = 5,500; Net = 49,500; Add: CGST 9% = 4,455; Add: SGST 9% = 4,455	58,410	49,500	4,455	4,455	-
Jul 16	PB-342	Patel Bros., Ahmedabad	40 irons @ ₹1,200 = 48,000; Less: trade discount 5% = 2,400; Net = 45,600; Add: IGST 18% = 8,208	53,808	45,600	-	-	8,208
		Total		1,12,218	95,100	4,455	4,455	8,208

Purchases Return Book

Date	Debit Note No.	Name of supplier	Details	Total ₹	Purchases return ₹	CGST ₹	SGST ₹	IGST ₹
Jul 9	DN-21	Sen Traders, Jaipur	2 coolers @ ₹6,000 = 12,000; Less: trade discount 10% = 1,200; Net = 10,800; Add: CGST 9% = 972; Add: SGST 9% = 972	12,744	10,800	972	972	-
		Total		12,744	10,800	972	972	0

Worked example

Suppose 2 coolers bought at ₹6,000 each less 10% trade discount (CGST 9% + SGST 9%) are returned to Sen Traders. Find the amount of the debit note.

Try it first, then show the solutionSolution

1. Gross 12,000 − 10% = ₹10,800
2. CGST 9% = ₹972; SGST 9% = ₹972
3. Debit note = 10,800 + 972 + 972 = ₹12,744

Answer: ₹12,744; Sen Traders is debited with this amount.

Sales book and sales return book (with GST)

NCERT section 4.4 and 4.5

The sales book records only credit sales of goods. Cash sales go to the cash book; sale of an old asset on credit goes to the journal proper. Its columns mirror the purchases book: invoice number, customer, details, total, and in analytical form the sales value with Output CGST, SGST or IGST.

When a customer returns goods, the seller issues a credit note (the customer's account is credited). The sales return (return inwards) book records these, at the same net price and GST as the original sale.

Posting: each customer's account is debited with the invoice total (goods + GST); at the month-end Sales A/c is credited with the sales column total and Output CGST, SGST and IGST with theirs. From the sales return book, each customer is credited, and Sales Return A/c and the output tax accounts are debited with the totals.

Sales Book of Dev Electricals

Date	Invoice No.	Name of customer	Details	Total ₹	Sales ₹	CGST ₹	SGST ₹	IGST ₹
Jul 11	DE-501	Gupta Stores, Jaipur	4 coolers @ ₹8,000 = 32,000; Less: trade discount 5% = 1,600; Net = 30,400; Add: CGST 9% = 2,736; Add: SGST 9% = 2,736	35,872	30,400	2,736	2,736	-
Jul 22	DE-502	Mehra Agencies, Agra	15 irons @ ₹2,000 = 30,000; Less: trade discount 10% = 3,000; Net = 27,000; Add: IGST 18% = 4,860	31,860	27,000	-	-	4,860
		Total		67,732	57,400	2,736	2,736	4,860

Sales Return Book

Date	Credit Note No.	Name of customer	Details	Total ₹	Sales return ₹	CGST ₹	SGST ₹	IGST ₹
Jul 25	CN-07	Mehra Agencies, Agra	3 irons @ ₹2,000 = 6,000; Less: trade discount 10% = 600; Net = 5,400; Add: IGST 18% = 972	6,372	5,400	-	-	972
		Total		6,372	5,400	0	0	972

Posted to the ledger:

Sales A/c

Dr: Particulars	₹	Cr: Particulars	₹
To Balance c/d	57,400	Jul 31 By Sundries as per Sales Book	57,400
Total	57,400	Total	57,400

Mehra Agencies Account

Dr: Particulars	₹	Cr: Particulars	₹
Jul 22 To Sales A/c (with GST)	31,860	Jul 25 By Sales Return A/c (with GST)	6,372
		By Balance c/d	25,488
Total	31,860	Total	31,860

Worked example

Suppose 15 irons at ₹2,000 each, less 10% trade discount, are sold on credit by a Jaipur firm to a customer in Agra; GST 18%. Find the invoice total and which tax column is used.

Try it first, then show the solutionSolution

1. Gross 30,000 − 10% = ₹27,000
2. Rajasthan to Uttar Pradesh is inter-state: IGST 18% = ₹4,860
3. Invoice total = 27,000 + 4,860 = ₹31,860

Answer: ₹31,860 in the IGST column; Mehra Agencies is debited ₹31,860.

Journal proper

NCERT section 4.6

The journal proper (residual journal) records transactions that do not belong in any special book:

1. Opening entry: assets, liabilities and capital brought forward at the start of the year.
2. Adjustment entries at the year-end: outstanding expenses, prepaid expenses, depreciation, accrued income, income received in advance.
3. Rectification entries: correcting errors.
4. Transfer and closing entries: drawings to capital; revenue and expense accounts to the Trading and Profit and Loss Account.
5. Other entries: credit purchase or sale of assets (not goods); goods taken by the owner for personal use; goods given away as free samples or as charity; loss of goods by fire or theft; cancellation of discount when a cheque is dishonoured; bad debts written off.

Particulars	Dr (₹)	Cr (₹)
Furniture A/c ... Dr	30,000
Input CGST A/c ... Dr	2,700
Input SGST A/c ... Dr	2,700
To Woodcraft (supplier)		35,400
(Furniture bought on credit, GST 18%)
Drawings A/c ... Dr	4,000
To Purchases A/c		4,000
(Goods taken for personal use at cost)
Advertisement A/c ... Dr	2,500
To Purchases A/c		2,500
(Goods distributed as free samples)
Loss by Fire A/c ... Dr	15,000
To Purchases A/c		15,000
(Goods destroyed by fire)

Worked example

A cheque of ₹19,600 received from Kiran in full settlement of ₹20,000 is dishonoured. Where and how is it recorded?

Try it first, then show the solutionSolution

1. The bank column of the cash book is credited "By Kiran 19,600"
2. The discount allowed earlier is cancelled through the journal proper: Kiran Dr 400; To Discount Allowed A/c 400

Answer: Kiran is debited with the full ₹20,000: ₹19,600 via the cash book and ₹400 via the journal proper.

Recording of Transactions - II in real life

Each concept, met in an everyday situation. Read the situation, answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Topics in this chapter

• Three-Column Cash Book: Cash, Bank and Discount Columns with Contra Entries
• Petty Cash Book: Imprest System, Analytical Columns and Reimbursement

Recording of Transactions - II: key facts

Net invoice value

Net value = Quantity × Rate − Trade discount

GST is charged on the net value.

Invoice total (intra-state)

Total = Net value + CGST + SGST

Each of CGST and SGST is half the GST rate.

Invoice total (inter-state)

Total = Net value + IGST

IGST is the full GST rate.

Petty cash reimbursement

Reimbursement = Imprest − Balance in hand = Amount spent

After reimbursement the petty cashier again holds the full imprest.

Cash book balance

Cash balance = Opening cash + Cash receipts − Cash payments (never negative)

Bank column: a credit balance is an overdraft.

Cash to deposit to keep a fixed balance

Deposit = Cash in hand − Balance to be kept

Recorded as a contra entry (C).

Net purchases and net sales

Net purchases = Purchases − Purchases returns; Net sales = Sales − Sales returns

Returns books are totalled separately and posted to return accounts.

How the school exam asks Recording of Transactions - II

The question patterns to expect, and the method that works for each.

Tricks to remember Recording of Transactions - II

Short memory aids. Say each one aloud once, then use it on a question the same day.

• Which book?

  "Cash? Cash book. Credit goods? Purchases or sales book. Coming back? Return book. Anything else? Journal proper."

  Use it when: Choosing the book.

• Debit note vs credit note

  Buyer Debits the supplier (Debit note = return outward); Seller Credits the customer (Credit note = return inward).

  Use it when: Return book questions.

• Contra = C

  C for Contra, C for "Cash and bank both", C for "Can't post".

  Use it when: Cash book with a bank column.

• Posting day books

  Persons daily, totals monthly.

  Use it when: Posting subsidiary books to the ledger.

Recording of Transactions - II: exam-level solved questions

Ordered from exam level to HOTS. Cover the solution, write your own, then compare step by step.

Case-study practice (Section E style)

Read the situation, then answer every part. In a school exam set on the board pattern this is a 4-mark question split into 1 + 1 + 2 marks.

Where the marks are

How a typical answer is split into step marks. Show every step: a right final answer alone rarely earns full marks.

Where students lose marks in Recording of Transactions - II

The slips examiners see most often, and what to write instead.

• ✗Mistake: Entering a credit purchase of an asset in the purchases book

  The word "purchase" appears in the question.

  Wrong working

  Purchases book: computer bought on credit ₹45,000

  Right working

  Journal proper: Computer A/c Dr 45,000; To Supplier 45,000

  ✓Do this: The purchases book is only for goods bought on credit.

  Usually costs: 1 mark.

• ✗Mistake: Treating cash withdrawn for personal use as a contra entry

  Cash is withdrawn from the bank in both cases.

  Wrong working

  Cash column Dr 6,000 and bank column Cr 6,000 (C)

  Right working

  Bank column, payments side: "By Drawings A/c 6,000" only

  ✓Do this: Contra only when the cash stays in the business.

  Usually costs: 1 mark and wrong closing balances.

• ✗Mistake: Posting contra entries to the ledger

  Every other cash book entry is posted.

  ✓Do this: Write "C" in the L.F. column and do not post; both sides of the entry are already in the cash book.

  Usually costs: ½-1 mark.

• ✗Mistake: Showing the petty cash balance as the amount spent

  Mixing up balance and reimbursement.

  Wrong working

  Imprest ₹5,000, spent ₹3,720: reimbursement ₹1,280

  Right working

  Reimbursement ₹3,720 (amount spent); balance after reimbursement ₹5,000

  ✓Do this: The main cashier reimburses exactly what was spent.

  Usually costs: 1 mark.

• ✗Mistake: Computing GST before trade discount in day books

  Following the order of the invoice lines.

  Wrong working

  Gross 55,000 × 18% = 9,900 GST

  Right working

  Net 49,500 × 18% = 8,910 GST

  ✓Do this: Trade discount first, GST on the net value.

  Usually costs: 1 mark per invoice.

• ✗Mistake: Crediting Sales A/c item by item from the sales book

  Posting like the journal.

  ✓Do this: Customers are debited individually; Sales A/c and the output tax accounts are credited only with the periodic column totals.

  Usually costs: ½-1 mark in a posting question.

NCERT exercise guide: Recording of Transactions - II

What each exercise in the NCERT chapter tests, how to approach it, and a question of the same kind solved step by step. Questions here are written in our own words.

Practice questions on Recording of Transactions - II

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

1. Q1 · 1 mark · MCQExam level

   The sales book records:
   (a) all sales
   (b) cash sales of goods
   (c) credit sales of goods
   (d) credit sales of assets

   Hint

   Cash goes to the cash book.

   Answer

   (c) credit sales of goods

2. Q2 · 1 mark · MCQExam level

   A credit balance in the bank column of the cash book shows:
   (a) cash in hand
   (b) bank overdraft
   (c) favourable bank balance
   (d) an error

   Hint

   Payments exceed deposits.

   Answer

   (b) bank overdraft

3. Q3 · 1 mark · Very short answerExam level

   Which document is the basis of entries in the purchases return book?

   Hint

   Sent by the buyer to the supplier.

   Answer

   Debit note.

4. Q4 · 3 marks · Short answerExam level

   Give three advantages of the imprest system of petty cash.

   Hint

   Time, control, analysis.

   Answer

   (1) Saves the main cashier's time on small payments. (2) Control: the petty cashier must account for every rupee to get reimbursement; any loss is limited to the imprest. (3) Analytical columns show spending by type and give totals for posting.

5. Q5 · 3 marks · Short answerHarder exam level

   Suppose a Bengaluru trader sells 50 helmets at ₹1,600 each to a Mysuru shop on credit at 12.5% trade discount; GST 18%. Show the entry in the sales book and its posting.

   Hint

   Both in Karnataka.

   Answer

   Gross ₹80,000 − 12.5% = ₹70,000; CGST 9% ₹6,300; SGST 9% ₹6,300; total ₹82,600. The Mysuru shop is debited ₹82,600; at month-end Sales A/c is credited ₹70,000 and Output CGST and SGST ₹6,300 each.

6. Q6 · 4 marks · Short answerHarder exam level

   Suppose Mira Tailors has these transactions in August 2026. Prepare a simple cash book: Aug 1 cash in hand ₹8,200; Aug 4 bought goods for cash ₹12,500; Aug 7 cash sales ₹21,300; Aug 11 paid electricity bill ₹2,150; Aug 16 received from Rohit (a debtor) ₹7,600; Aug 19 bought goods on credit from Sunil ₹9,000; Aug 22 paid wages ₹6,800; Aug 26 withdrew ₹4,000 for personal use; Aug 30 cash sales ₹9,450.

   Hint

   One column per side; a credit purchase does not touch cash.

   Answer

   Simple Cash Book of Mira Tailors, August 2026

   Date	Receipts (Dr)	₹	Date	Payments (Cr)	₹
   Aug 1	To Balance b/d	8,200	Aug 4	By Purchases A/c	12,500
   Aug 7	To Sales A/c	21,300	Aug 11	By Electricity A/c	2,150
   Aug 16	To Rohit	7,600	Aug 22	By Wages A/c	6,800
   Aug 30	To Sales A/c	9,450	Aug 26	By Drawings A/c	4,000
   			Aug 31	By Balance c/d	21,100
   	Total	46,550		Total	46,550

   The credit purchase from Sunil (Aug 19) is not entered: it goes to the purchases book. Closing cash ₹21,100.

7. Q7 · 4 marks · Short answerHarder exam level

   Suppose a trader has cash ₹8,000 and bank ₹50,000 on 1st April. Apr 5: received cheque ₹12,000 from Lata, deposited. Apr 9: withdrew ₹6,000 from bank for personal use. Apr 15: cash sales ₹20,000. Apr 18: deposited ₹15,000. Apr 25: paid insurance by cheque ₹4,500. Find the closing cash and bank balances and identify the contra entry.

   Hint

   Withdrawal for personal use is not contra.

   Answer

   Cash: 8,000 + 20,000 − 15,000 = ₹13,000. Bank: 50,000 + 12,000 − 6,000 + 15,000 − 4,500 = ₹66,500. Only the ₹15,000 deposit (Apr 18) is a contra entry; the ₹6,000 personal withdrawal is drawings (bank column, payments side).

8. Q8 · 3 marks · Short answerHarder exam level

   Suppose a Chennai trader returns goods bought from a Bengaluru supplier: 20 pieces at ₹900 each, trade discount 10%, IGST 12%. Prepare the entry in the purchases return book and state the postings.

   Hint

   Return outward reverses input IGST.

   Answer

   Gross ₹18,000 − 10% = ₹16,200; IGST 12% = ₹1,944; debit note ₹18,144. The supplier is debited ₹18,144; at month-end Purchases Return A/c is credited ₹16,200 and Input IGST A/c credited ₹1,944.

9. Q9 · 4 marks · Short answerHarder exam level

   Explain with entries how the following are recorded: (a) cash withdrawn from bank for office use ₹8,000; (b) goods of ₹3,000 distributed as free samples; (c) machinery sold on credit to Ajay ₹40,000.

   Hint

   Two of them go to the journal proper.

   Answer

   (a) Cash book contra: cash column Dr "To Bank A/c 8,000" and bank column Cr "By Cash A/c 8,000", L.F. C. (b) Journal proper: Advertisement A/c Dr 3,000; To Purchases A/c 3,000. (c) Journal proper: Ajay Dr 40,000; To Machinery A/c 40,000.

10. Q10 · 4 marks · Short answerHarder exam level

    Distinguish between a trade discount and a cash discount with reference to how each appears in the purchases book and in the cash book.

    Hint

    One is in the details column only.

    Answer

    Trade discount: shown only in the details column of the purchases or sales book to arrive at the net value; never posted to any account. Cash discount: arises at payment; recorded when cash or a cheque is paid or received (in practice a discount column in the cash book or a journal entry), and posted to Discount Allowed or Discount Received A/c.

11. Q11 · 6 marks · Long answerHarder exam level

    Suppose your friend argues that a big firm should record all transactions in one journal "so nothing is missed". Give four reasons why special purpose books are better, and one transaction that must still go to the journal proper.

    Hint

    Division of work, posting totals.

    Answer

    (1) Division of labour: different clerks keep different books at the same time. (2) Fewer postings: only totals go to Purchases, Sales and GST accounts. (3) Quick information: total credit sales or cash balance is visible at once. (4) Better control and easier detection of errors and fraud. Still in the journal proper: opening entries, adjustment and closing entries, credit purchase of assets, goods withdrawn by the owner, loss by fire.

12. Q12 · 3 marks · Short answerHOTS / competency

    Suppose a firm's cash book (bank column) shows a debit balance of ₹14,000 at the start of a week. During the week cheques of ₹26,000 are issued and ₹9,000 is deposited, and the bank charges ₹200. Find the closing balance, say what it means, and on which side it is written as "Balance c/d".

    Hint

    Payments exceed receipts.

    Answer

    Receipts 14,000 + 9,000 = ₹23,000; payments 26,000 + 200 = ₹26,200; credit balance ₹3,200, a bank overdraft. "To Balance c/d 3,200" is written on the receipts (debit) side; it is brought down as "By Balance b/d" on the payments side.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1. 1.What is a contra entry?Show answer

   An entry affecting both cash and bank columns of the cash book, marked C and not posted.

2. 2.What does a credit balance in the bank column mean?Show answer

   A bank overdraft.

3. 3.Which book records the return of goods by a customer?Show answer

   Sales return (return inwards) book.

4. 4.Is cash purchase of goods recorded in the purchases book?Show answer

   No, in the cash book.

5. 5.What is the imprest?Show answer

   The fixed sum given to the petty cashier at the start of each period.

6. 6.Where is an opening entry recorded?Show answer

   In the journal proper.

7. 7.At what value are entries made in the purchases book?Show answer

   At the net value after trade discount, with GST shown separately.

8. 8.Which account is debited with the total of the purchases book?Show answer

   Purchases A/c (and the Input tax accounts with the GST totals).

Quick revision checklist

The night before the exam: can you do each of these without looking?

• ☐Can you name the six books and what each records?
• ☐Can you say why the cash book is both a journal and a ledger?
• ☐Can you identify contra entries and enter them correctly?
• ☐Can you balance cash and bank columns and spot an overdraft?
• ☐Can you prepare an analytical petty cash book and find the reimbursement?
• ☐Can you compute net value, GST and invoice total with trade discount?
• ☐Can you decide CGST + SGST or IGST from the two places?
• ☐Can you tell when a debit note or a credit note is issued?
• ☐Can you list five kinds of entries made in the journal proper?
• ☐Can you post a sales book to the customers' accounts and Sales A/c?

Recording of Transactions - II: frequently asked questions