Cash book functions as journal because it is the original book of entry where all transactions are first recorded just like a journal and it functions as a ledger as it records the credit and debit cash transactions of a company without the need of a separate cash account.

Question - 2 : - What is the purpose of contra entry?

Answer - 2 : -

Contra entry are those entries that impact both debit and credit side in accounting based on the situation. For example if a debit entry is recorded in an account, similar credit entry must be recorded. Its purpose is to indicate transactions that effect both cash and bank balances. These transactions have no impact on the financial position of the business and are denoted by the letter C in the L.F. column.

Question - 3 : - What are special purpose books?

Answer - 3 : -

Subsidiary books recording business transaction are known as special purpose books. Business transactions can be large in number making it difficult to record all in a single journal. Hence sub-dividing journals make recording of transactions quick, accurate and efficient. Some examples are cash book, purchases book, and sales book.

Question - 4 : - What is petty cash book? How it is prepared?

Answer - 4 : -

Recording of repetitive expenses in cash book will burden the cashier. Hence, a separate book is created where petty expenses are recorded. Examples of such type of expenses are: Stationery, Refreshment, Postage, and Conveyance. Petty cash book is maintained by Petty cashier.

Preparation is mostly done by Imprest System as it is more convenient. In this system, petty cashier is given a pre-defined sum of the money for a period. At the end of the period, the amount spent by him is reimbursed by cashier so that the cashier has the same amount again at the start of the period.

Question - 5 : -
Explain the meaning of posting of journal entries?

Answer - 5 : -

It refers to the process of transferring journal entries to their respective ledgers. Each transaction gets recorded in a journal and are subsequently transferred to respective ledgers

Question - 6 : - Define the purpose of maintaining subsidiary journal.

Answer - 6 : -

Many of the business transactions are repetitive in nature. Due to this reason, transactions which are similar in nature are recorded in special journals also known as daybooks or subsidiary journals.

Maintaining a subsidiary journal helps has following benefits:

1. Recording is faster and time saving

2. Records are easily accessible

3. Proper division of labour

Question - 7 : - Write the difference between return inwards and return outwards.

Answer - 7 : -

Basis of Comparison	Return Inwards	Return Outwards
Meaning	Goods returned to business by their customers	Goods purchased by business are returned to the suppliers.
Balance	It has debit balance.	It has credit balance.
Treatment	Deducted from Sales in the Trading Account.	Deducted from Purchases in the Trading Account.
Issued	Credit note is prepared by the seller.	Debit note is prepared by the buyer.
Reduction	Reduces the payment from the Debtors.	Reduces the payment made to the Creditors.
Term	It is also known as Sales Returns.	It is also known as Purchases Returns.

Question - 8 : - What do you understand by ledger folio?

Answer - 8 : -

It refers to a column in the journal where page number of the ledger book on which the relevant account appears is recorded is called as Ledger Folio, also abbreviated as L.F.

Question - 9 : - What is difference between trade discount and cash discount?

Answer - 9 : -

Basis of Comparison	Trade Discount	Cash Discount
Meaning	Discount offered on purchase of goods.	Discount for making payment.
Recording in books	Not recorded in accounting books	Recorded in cash book either on debit or credit side depending on discount provided or received.
Purpose	Encourage increase in sale.	Encourage on time payment.

Question - 10 : - Write the process of preparing ledger from a journal.

Answer - 10 : -

The following process describes the preparation of ledger from journal:

Locate the account to be debited in the ledger as entered in the journal
Enter date of transaction into date column of debit side.
Mention the account from which it is debited in journal, is written in the particulars column.
Enter the page number of the journal in the J.F. column. The corresponding page number of the ledger account is written in the L.F. column of the journal.
Enter amount in the amount column in the debit side.
For credit side follow the same procedure for crediting the entry.

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