Recording of Transactions – II — Practice

Question 1

What is posting?

Accepted Answer

Transferring entries from the journal to the relevant ledger accounts.

✦ Answer: journal-to-ledger transfer of entries.

Question 2

Which cash book has cash, bank and discount columns?

Accepted Answer

The three-column cash book.

✦ Answer: three-column cash book.

Question 3

In which book is a credit sale of goods recorded?

Accepted Answer

The sales book (sales day book).

✦ Answer: sales book.

Question 4

A cash account has debit total ₹40,000 and credit total ₹31,000. State the balance and its type.

Accepted Answer

Step 1 — Balance = 40,000 − 31,000 = 9,000.

Step 2 — Debit side is larger, so it is a debit balance (cash in hand).

✦ Answer: ₹9,000 debit balance.

Question 5

What is a contra entry? Give an example.

Accepted Answer

Step 1 — An entry affecting both cash and bank columns of the cash book, marked 'C'.

Step 2 — Example: cash deposited into bank — Bank column debited, Cash column credited.

✦ Answer: a cash↔bank entry recorded on both sides, marked C.

Question 6

Explain the imprest system of petty cash.

Accepted Answer

Step 1 — The petty cashier is given a fixed sum (float) for small expenses.

Step 2 — At period-end the amount actually spent is reimbursed, restoring the original float.

✦ Answer: a fixed float that is topped up by the amount spent each period.

Question 7

State which book records each: (a) credit purchase of goods, (b) goods returned by a customer, (c) purchase of machinery on credit.

Accepted Answer

Step 1 — (a) Purchases book (credit purchase of goods).

Step 2 — (b) Sales returns / returns inward book.

Step 3 — (c) Journal proper (asset bought on credit, not goods).

✦ Answer: purchases book; sales returns book; journal proper.

Question 8

Differentiate trade discount and cash discount in recording.

Accepted Answer

Step 1 — Trade discount is a reduction on the list price given on the invoice; it is deducted before recording and NOT shown in the books.

Step 2 — Cash discount is allowed for prompt payment and IS recorded (discount column of the three-column cash book).

✦ Answer: trade discount not recorded; cash discount recorded.

Question 9

Why is the ledger called the 'book of secondary entry'?

Accepted Answer

Step 1 — Transactions are first recorded in the journal (book of original entry).

Step 2 — They are then posted to the ledger, so the ledger is the secondary/second stage.

✦ Answer: because entries reach it after the journal, as the second stage.

Practice — Recording of Transactions – II