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1. Small payments are sometimes recorded in a separate book called
(a) Cash Book.
(b) Bank Book.
(c) Small Payment Book.
(d) Petty Cash Book.
Petty cash book is or book where small payments are recorded. It is an extension of main cash book. So, option (d) is correct answer.
2. The balance of cash book shows
(a) Net income.
(b) Cash in hand.
(c) Net expenditure.
(d) Net bank balance.
The cash book balance shows the amount of cash-in-hand. So, option (b) is correct
3. Cash in hand A/c may have
(a) Only debit balance.
(b) Only credit balance.
(c) Debit or credit balance.
(d) None of the above
All receipt (inflow) of cash is debited to cash a/c. All payment of cash (outflow) is credited to cash a/c. The cash in hand is represented by the difference of receipts & payments. Since payments (credits) cannot be more than receipts (debits), there is always debit balance in cash a/c. So, option (a) is correct answer.
4. The main advantage(s) of the petty cash book is / are
(a) Control over small payment.
(b) Saving of time of the chief-cashier.
(c) Saving of labour in writing up the Cash Book and posting into ledger.
(d) All of them.
The main advantages of petty cash book are saving the time of cashier in making small payments and writing numerous transactions in main cash book. It provides better control on small payments as this task is better dome by petty cash keeper. The number of entries and posting to ledger gets reduced as only a monthly total of each account is posted into the main ledger.
So, option (d) is correct answer.
5. In a Three Column Cash Book
(a) Trade Discount allowed is recorded on the debit side of Cash Book.
(b) Cash Discount received is recorded on the Credit side of Cash Book.
(c) Discount Column are balanced.
(d) Bank Column is always debit balance.
When cash discount received then the entry would be
Creditors A/c Dr
To Cash A/c Cr
To Discount Received A/c Cr
So, trade discount received should be recorded in credit side of the cash book. So, option (b) is correct answer.
6. In a Three Column Cash Book.
(a) Only Cash Column and Bank Columns are balanced.
(b) Only Cash Column and Discount Column are Balanced.
(c) Cash Column, Bank Columns and discount Columns are balanced.
(d) None of the above.
Discount column in the cash book are not balanced and the totals are entered in a ledger called discount account. Only cash & bank columns are balanced. So, option (a) is correct answer.
7. Which is not Contra entry is three column Cash Book.
(a) Cash Deposited into Bank.
(b) Cash withdrawn from Bank.
(c) Cash withdrawn from Bank for Personal use.
(d) None of the above.
Cash withdrawn from bank for personal use is not contra entry it is a personal expenses and debited to drawings a/c. So, option (c) is correct answer.
8. When a cheque is received on a particular date is not deposited the same day into bank, it is entered in
(a) Cash column on the debit side.
(b) Bank column on the debit side.
(c) Cash column on the credit side.
(d) Cash column on both the debit side and credit side.
When a cheque received on a particular date then the entry is passed in both debit & credit side of cash column (because no cash is received and the two entries nullify the cash balance effect). When the cheque is deposited into bank, it is entered into the debit side of the bank column.
So, option (d) is correct answer
9. At the end of the year, Petty Cash Book’s balance is shown in the balance sheet.
(a) As a part of cash balance.
(b) Separately as current asset.
(c) As a part of fixed asset.
(d) None of the above.
As petty cash book is a part of cash book, so its balance is shown in balance sheet like main cash book balance, So, option (a) is correct answer.
10. Petty cash is normally used to pay
(a) Expenses relating to small expenses, like postage conveyance, etc
(b) Salaries and wages to Employees.
(c) For purchase of Furniture and Machinery.
(d) All of the above.
Petty cash is used to pay all sorts of small expenses, like-postage and telegram, conveyance. So, option (a) is right answer.
11. The term “Imprest System” is used in relation to
(a) Sales book
(b) Purchase book
(c) Ledger book
(d) Petty cash book
In Imprest system, certain fixed amount is given to the petty cashier for meeting small expenses which are recorded in petty cash book. So, option (d) is correct answer.
12. Discount column in the Cash book are——-and their totals entered in the——–in the ledger.
(a) Balanced; Cash A/c
(b) Balanced; discount A/c
(c) Not balanced; discount A/c
(d) Not balanced; Cash A/c
Discount column in the cash book are not balanced and the totals are entered in a ledger called discount account. So, option (c) is correct answer.
13. In Three column Cash book—–columns are memorandum columns :
(a) Cash
(b) Bank
(c) Discount
(d) Overdraft
In triple column cash book, discount columns are a memorandum column, because like cash and bank column it is not balanced. So, option (c) is correct answer.
14. The balance of Bank column of Cash Book is ———-balance :
(a) Debit
(b) Credit
(c) Either Debit or Credit
(d) None
The balance of cash column will always be debit. The balance of bank column will be debit (in case of current a/c) and may be credit (in case of cash credit / overdraft a/c). So, option (c) may be considered as correct answer.
15. Bank overdraft is shown on the———side of the Trial Balance
(a) Debit
(b) Credit
(c) Either Debit or Credit
(d) None
Bank overdraft shows a credit balance (it is a liability). So, option (b) is correct answer.
16. Overdraft means credit balance of Bank A/c
(a) True
(b) Partly True
(c) False
(d) none
Bank overdraft shows a credit balance (it is a liability). So, option (a) is correct answer.
17. Net balance of the both discount columns in the Cash Book is transferred to Ledger Book.
(a) Discount column of Debit side only
(b) Discount column of Credit side only
(c) Net Balance of Discount column of Debit & Credit side
(d) Both sides of Discount column to Ledger Books separately.
At the end of each period the debit side of the discount column of the cash book is totaled, and posted to the debit side of the discount allowed account maintained in the ledger. Likewise, the credit side of the discount column is totaled and posted to the credit of discount received account maintained in the ledger. Amount from both side is posted and not the net balance of discount columns. So, option (d) is correct answer.
18. Cash withdrawn from bank for office use will be entered in which columns of Cash / Bank Book
(a) Cash column in Debit side only
(b) Cash column in Credit side only
(c) Cash column in Debit side and Bank Column in Credit side.
(d) Bank column in Debit side & Cash column in Credit side.
Cash withdrawn from the bank for office use. is a contra entry and should be entered both side of the cash / bank book. Moreover as cash is coming in (cash is receiver), the amount would be entered in debit side of cash column and credit side of bank column (bank is giver). So, option (c) is correct answer.
19. A 3 column cash book contains
(a) Cash, bank & petty cash column on both sides
(b) Cash, Bank & Discount columns on both sides.
(c) Cash & bank in Credit side and Discount Column in Debit side
(d) Cash & bank in Debit side and Discount Column in credit side
The three column cash book contains cash, bank and discount columns on both sides. So, option (b) is right answer.
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