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Chapter Analysis
Intermediate45 pages • EnglishQuick Summary
Chapter 4, 'Recording of Transactions - II,' covers advanced aspects of maintaining cash books, discussing various types like single and double column cash books, and their roles in simplifying accounting records by splitting them into special journals. The chapter emphasizes the importance of subsidiary books in recording repetitive transactions efficiently and demonstrates the balance of accounts for accurate financial reporting. Additionally, it includes detailed procedures for recording transactions using these specialized books.
Key Topics
- •Types of Cash Book
- •Special Purpose Books
- •Petty Cash Book
- •Balancing of Accounts
- •Journal Proper Usage
- •Single vs Double Column Cash Books
- •Journal to Ledger Posting
Learning Objectives
- ✓State the need for special purpose books
- ✓Record transactions in cash book and post them in the ledger
- ✓Prepare the petty cash book
- ✓Record the transactions in special purpose books
- ✓Balance the ledger accounts
Questions in Chapter
What are special purpose books?
Answer: Special purpose books are journals meant for recording all transactions of a similar nature for quick, efficient, and accurate recording.
Page 100
Briefly state how the cash book is both journal and ledger.
Page 152
What is petty cash book? How it is prepared?
Page 154
Explain the need for drawing up the special purpose books.
Page 153
What is cash book? Explain the types of cash book.
Page 153
Additional Practice Questions
What are the advantages of a double column cash book compared to a single column cash book?
mediumAnswer: A double column cash book includes a bank column in addition to the cash column, enabling the recording of both cash and bank transactions. This eliminates the need to maintain separate books for cash and bank accounts and provides a clear view of both cash and bank balances.
Explain the role of a petty cash book in business accounting.
easyAnswer: A petty cash book is used to record small day-to-day cash expenses that are too trivial to be recorded separately in the main cash book. It helps in maintaining effective control over small disbursements and reduces the bulkiness of the main cash book.
Describe how transactions are posted from a journal proper to ledger accounts.
mediumAnswer: Transactions recorded in the journal proper are transferred to their respective ledger accounts through a process called posting. Each entry in the journal is analyzed in terms of accounts debited and credited, and corresponding entries are made in the ledger to reflect the transaction in the accounting records.
How does the balancing of account differ from closing of account?
hardAnswer: Balancing an account involves totaling both debit and credit sides and finding the difference to be carried forward to the next period, while closing an account typically means transferring balances of expenses and revenues to the profit and loss account at the end of an accounting period.
Illustrate with an example the concept of contra entry in double column cash book.
easyAnswer: Contra entry involves transaction entries that affect both cash and bank columns in the double column cash book. For example, depositing cash into a bank account will be recorded as a debit under the bank column and a credit under the cash column. Thus, depicting internal fund movement between them.