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Sampurna June 2024

Cash Book & Balance Theory DPP-01

(a) True/False

1. Cash book is a subsidiary book as well as a principal book.

2. Cash sales are recorded in the sales book.

3. Bills receivable book is a subsidiary book.

4. Discount column of the cash book records the trade discount.

5. If the bank column is showing the opening balance on the credit side, it is an overdraft.

6. Discount column of the cash book is never balanced.

(b) MCQ

7. The total of discounts column on the debit side of the cash book, recording cash discount deducted by customers
when paying their accounts, is posted to the
(1) Credit of the discount allowed account (2) Debit of the discount allowed account
(3) Credit of the discount received account (4) Debit of the discount received account

8. A second hand motor car was purchased on credit from B Brothers for Rs. 10, 000 will be recorded in____.
(1) Journal Proper (General Journal) (2) Sales Book
(3) Cash Book (4) Purchase Book

9. The weekly or monthly total of the Purchase Book is_____.

(1) Posted to the debit of the Purchases Account.
(2) Posted to the debit of the Sales Account.
(3) Posted to the credit of the Purchases Account.
(4) None of the Above

10. Cash book is a type of_____but treated as a____of accounts.

(1) Subsidiary book, principal book (2) Principal book, subsidiary book
(3) Subsidiary book, subsidiary book (4) principal book, principal book
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11. In which book of original entry, will you record an allowance of Rs.50 was offered for an early payment of cash of
Rs. 1, 050______.
(1) Sales Book (2) Cash Book
(3) Journal Proper (General Journal) (4) None of the Above

12. In which book of original entry, will you record bills receivable of Rs.1, 000, which was received from a debtor in
full settlement for a claim of Rs. 1, 100, is dishonoured_____.
(1) Purchases Return Book (2) Bills Receivable Book
(3) Journal Proper (General Journal) (4) None of the Above

(c) Sub

13. Differentiate between Trade discount and Cash discount.

14. What are the advantages of subsidiary books?

15. From the following transactions prepare the Cash Book with cash and discount columns: Aug. 2016
1 Opening cash balance 2500. 00

Received from D & Co. ₹ 1,350 in full settlement of ₹

3
1,400

4 Received for cash sales 1250. 00

Paid to Rajesh & Co. ₹ 775 in full settlement of his account for
5 800. 00
7 Purchased office furniture 670. 00

13 Paid for postal stamps 25. 00

15 Paid for office rent for month of July, 2016 125. 00

17 Used office cash for meeting personal expenses 150. 00

19 Sold goods on credit to Mr. Faithful 1700. 00

Paid to Rajnikant ₹ 670 in full settlement of his account for

20

20 Deposited in the Bank all cash in excess of ₹ 1, 200.

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16. Write up a three column cash book from the following:

Sept.
2016 ₹

Cash balance 1, 700. 00

1
Bank Overdraft 5, 600. 00

Received from Dinanath cash ₹ 750 and a cheque of

5
₹ 860 in full settlement of ₹1650

7 Paid for office rent by cheque 500. 00

8 Paid for wages in cash 250. 00

Sold goods for cash ₹ 1500 and received half the

9 amount in cash and half by cheque which is
deposited in the bank

Bank pass book states that the bank has collected

10 600. 00
interest on investment

12 Cheque received on 5th paid into bank

Transferred ₹ 3000 from fixed deposit to Current

15
account

Drew for personal use cash ₹ 250 and a cheque of ₹

20
375

25 Made cash purchase and paid by cheque ₹ 1595

30 Paid Dinesh ₹ 800 by cheque

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Answer Key
9. (1)
1. (True)
10. (1)
2. (False)
11. (2)
3. (True)
12. (3)
4. (False)
13. (H & S)
5. (True)
14. (H & S)
6. (True)
15. (H & S)
7. (2)
16. (H & S)
8. (1)
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Hints & Solutions

1. (True)
A business cash book contains the initial entry for each cash transaction. As a result, it is known as the book of
initial entry or the Subsidiary book. A cash book works as both a cash and bank account, and it is part of the ledger,
so no separate cash account is prepared. Thus, the Ledger includes the cash book too.
A principal book of accounts is a ledger.
A cash book is referred to both as a subsidiary book and a principal book.

2. (False)
The statement is false as
Cash sales of all assets are recorded in the Cash Book.
Credit sales of goods and materials are recorded in the Sales Book.
Credit sales of other assets are journalized in Journal Proper.

3. (True)
The Bills Receivable Book is one of the Subsidiary Books. Other Subsidiary Books are Purchase Book, Sales Book,
Purchase Return Book, Sales Return Book, Journal Proper, Bills Payable Book, etc.

4. (False)
Trade discounts are widely accepted and can be used for either the list price or the price from a catalog.
Trade discounts are usually not to be reported in the books of accounts unless required to increase the sale or
provide retailers with enough margin.
The cash discount is recorded in the cash book's discount column. The trade discount is not shown in the books of
accounts.

5. (True)
In the Cash Book, a credit balance reflects an overdraft balance. This balance shows that the number of payments
exceeds the number of revenues.
In the Cash Book, the balance is known as an overdraft or a credit balance when the credit side, or payments side,
exceeds its debit side, or receipts side.
In the cash book, the debit balance is the total amount of bank deposits. It shows the favorable balance in the
passbook or the favorable balance in the cash book. On the other hand, a bank overdraft appears in the cash book's
credit balance.
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6. (True)
In a single-column cash book, all cash receipts and allowed discounts are recorded on the debit side, and all cash
payments and discounts received are recorded on the credit side.
Discount received while settling creditors is shown on the debit side of the cash book and transferred to the
discount received account.
Likewise to the debit side, the credit side of the cash book shows the discount paid when receiving payments from
debtors and added to the discount-paid account.
The discount column is not balanced. The balance of the discount columns is transferred to the Profit and Loss
account.
Accordingly, neither of them will be balanced nor set off.

7. (2)
The total of the Discount Allowed column on the debit side of the cash book is recorded to the debit side of the
Discount Allowed Account at the end of the month.
The total of the Discount Received column on the credit side of the cash book is recorded to the credit side of the
Discount Received Account.

8. (1)
Credit Purchases of assets other than materials and goods dealt in by the business are journalized in the Journal
Proper.
Only credit purchases of materials and goods dealt in by the business are recorded in Purchase Book.
The cash purchases of all assets are recorded in Cash Book.
The Sales Book is used to record transactions related to credit sales of materials and goods dealt in by the business.
Hence, a second-hand motor car purchased on credit from B Brothers for Rs. 10, 000 will be recorded in Journal
Proper (General Journal).

9. (1)
The weekly or monthly total of the Purchase Book represents the total of purchases made in a week or month.
Hence it is posted to the debit of the Purchases Account.

10. (1)
Cash Book provides both a ledger and a journal, recording both original entries and adjustments.
Because all cash transactions are initially recorded in the cash book and eventually recorded from the cash book to
various accounts in the ledger, it is considered a subsidiary book.
Ledger accounts are used to record transactions in the cash book.
There is no need for a cash account in the ledger because cash receipts are recorded on the debit side and cash
payments on the credit side.
Therefore, Cash Book fulfills the role of a ledger account. It is evident from the foregoing that Cash Book works as
both a subsidiary book and a ledger.

11. (2)
When an allowance is offered on cash payment, it is recorded in the discount column of “Cash book with Discount
Column” on the debit side. Hence, an allowance of Rs. 50 offered for early payment of cash of Rs. 1, 050 will be
recorded in Cash Book.
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12. (3)
The event of dishonour of bill receivable is recorded in Journal Proper, and not Bills Receivable Book because bills
receivable book is used to record transactions related to the receipt of Bills Receivables.
Hence, dishonour of a bill receivable of Rs. 1, 000 received from a debtor in full settlement for a claim of Rs. 1, 100
will be recorded in Journal Proper.

13. (H & S)
Trade discount and Cash discount:
Trade Discount:
Trade discount is a discount on the selling price for bulk purchase or for purchasing above a minimum quantity or is
offered generally to regular customers.
It is also called quantity discount.
This is a technique of sales promotion.
It is generally determined at the stage of sale itself & is deducted from the sale/purchase value & hence doesn't
appear separately in the Books of accounts & Final a/cs.
Cash Discount:
Cash discount is the discount offered by the supplier in consideration of early or timely payment.
It may vary with the period of payment.
It is accounted as a separate item & appears in the Profit & loss a/c.
Cash discount is usually given at the time of payment/receipt as against trade discount is given at the stage of
sale/purchase.

14. (H & S)
Following are the uses & advantages of subsidiary book:-
1. Division of work: In place of one journal, there will be multiple subsidiary books & therefore the accounting
work can be easily divided amongst a number of clerks.
2. Specialisation and efficiency: When the same work is allotted to a particular person over a period of time, he
acquires full knowledge of it and becomes efficient in handling it. Thus division of work results in advantage
of specialisation of efficiency.
3. Saving of the time: Various accounting process can be undertaken simultaneously because of the use of
multiple subsidiaries. This results in the work being completed quickly.
4. Availability of information: Since a separate register or book is kept for each class of transactions, the
information relating to each transaction will be available at one place, in a comprehensive manner.
5. Facility in checking: When the trial balance does not match, the locating of the error or errors is facilitated by
the maintenance of separate subsidiary books. Even the commission of errors and frauds will be checked by
the use of multiple subsidiary books.
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15. (H & S)
Cash Book

Date Particulars L.F Dis. Cash Date Particulars L.F Dis. Cash

1. 8. 2016 To opening b/f 2, 500 5. 8. 2016 By Rajesh & Co. 25 775

7. 8. 2016 By Furniture A/c 670

3. 8. 2016 To D & Co. A/c 50 1, 350
13. 8. 2016 By Postage Expense 25
4. 8. 2016 To Sales A/c 1, 250 A/c
15. 8. 2016 By Rent payable A/c 125
By Drawing A/c
17. 8. 2016 By Rajnikant A/c 150
20. 8. 2016 30 670
By Bank A/c
20. 8. 2016 1, 485
By Balance c/d
20. 8. 2016 1, 200

50 5, 100 55 5, 100
It is assumed that in July month provision for rent payable was made, hence, now on payment rent payable account
is debited.
Credit sale of 19. 08. 16 will be entered in the sales book or in Journal, if the sales book is not maintained.

16. (H & S)
Triple Column Cash Book
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Cheque received but not deposited in bank - The usual practice in the books on accounting is to show such amount as cash
and when the same is deposited in bank then cash a/c is credited and bank a/c debited (As done for 860 in above
problem).I (author) don't consider it appropriate and suggest the following -
a. In real life it will be a daily routine to receive cheque and deposit it the next day hence to obviate
unnecessary confusion and complication, it should be debited to the bank a/c on receipt itself.
b. When it is a year end situation, debit such cheque to cheques in hand a/c rather than in cash a/c. So that in the
balance sheet we will show cash balance (which is actual cash), cheques in hand and bank balance (which
does not include cheque received but not deposited).

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