Cash book Questions & Answers​

1. What is a Cash Book?

Answer:
A Cash Book is a financial journal that records all cash receipts and payments, including bank transactions. It serves as both a journal and a ledger for cash transactions.

2. How many types of cash books are there?

Answer:
There are three types of cash books:

• Single Column Cash Book

• Double Column Cash Book (Cash and Bank)

• Triple Column Cash Book (Cash, Bank, and Discount)

3. What is a Contra Entry in Cash Book?

Answer:
A contra entry is a transaction recorded on both sides of the cash book when cash is deposited into or withdrawn from the bank.

4. What is the purpose of a Petty Cash Book?

Answer:
A Petty Cash Book records small or minor expenses that are paid in cash, helping to keep track of petty expenses separately from the main cash book.

5. How is a Discount Allowed recorded in a cash book?

Answer:
Discount Allowed is recorded on the debit side of the cash book as it is a loss or expense to the business.

6. What does the ‘Bank Column’ in a cash book record?

Answer:
The Bank Column records all transactions related to the bank account, such as deposits and withdrawals.

7. How is a dishonored cheque recorded in the cash book?

Answer:
A dishonored cheque is recorded as a debit entry in the cash book to reverse the previous receipt entry.

8. What is meant by ‘overdraft’ in a cash book?

Answer:
Overdraft occurs when the bank balance in the cash book becomes negative, meaning more withdrawals than deposits.

9. How are discounts received recorded in the cash book?

Answer:
Discounts received are recorded on the credit side of the cash book as they reduce expenses or increase income.

10. What is the difference between Cash Book and Cash Account?

Answer:
Cash Book records both cash and bank transactions and acts as a journal and ledger, whereas Cash Account records only cash transactions and is a ledger account.

11. What is a double entry in cash book?

Answer:
A double entry in cash book means recording the same transaction on both debit and credit sides when cash is transferred to or from the bank.

12. Why is a cash book considered both a journal and a ledger?

Answer:
Because it records all cash transactions chronologically (like a journal) and also shows the balance of cash and bank (like a ledger).

13. How do you record a payment made by cheque in the cash book?

Answer:
Payments made by cheque are recorded on the credit side of the bank column in the cash book.

14. What happens if a cash book does not balance?

Answer:
If the cash book does not balance, it indicates errors such as omission, commission, or incorrect recording that need to be located and corrected.

15. What is a petty cash imprest system?

Answer:
The imprest system is a method where a fixed amount is given for petty expenses, and it is replenished periodically to maintain the set amount.

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