Account 3 Marks Question

Yes. Bank overdraft is the amount payable by the firm to the bank since the amount drawn is more than the balance held. Bank balance is the amount owned by the firm that is lying deposited in the bank, thus, it is an asset.

In accounting, an account is a record in the general ledger that is used to sort and store transactions. For example, companies will have a Cash account in which to record every transaction that increases or decreases the company's cash. Another account, Sales, will collect all of the amounts from the sale of merchandise. Most accounting systems require that every transaction will affect two or more accounts. For example, a cash sale will increase the Cash account and will increase the Sales account.

Under this system, the petty cashier is given a definite sum, say ₹ 2,500, at the beginning of a certain period. This amount is called 'imprest amount'. The petty cashier goes on paying all petty expenses out of this imprest amount and records them in the petty cash book maintained by him. At the end of the given period, say after a month, the chief cashier reimburses the amount actually spent by the petty cashier.

Contra Entry: Contra entries are the entries which affect both cash and bank, i.e., balance one will decrease and the other will increase due to such transactions. Such transactions are recorded on both sides of the Cash Book. Let us take an example to understand it better.

1. Cash deposited into the Bank ₹ 20,000: In this transaction, Bank Account is to be debited and Cash Account is to be credited. Debit aspect is recorded on the debit side of the Bank Column and credit aspect is recorded on the credit side of Cash Column.
2. Cash withdrawn from Bank for Office Use ₹ 10,000: In this transaction Cash Account is to be debited and Bank Account is credited. Debit aspect is recorded on the debit side of the Double Column Cash Book in the Cash Column and credit aspect is recorded on the credit side of the Double Column Cash Book in the Bank Column.

Yes. Sales can be either in cash or on credit. Credit sales are recorded in the Sales Book and cash sales in the Cash Book. The source documents for recording entries in the Sales Book are invoices or bills issued to customers. Entries are recorded with the net amount of the invoice after deducting trade discount.

These are enteret in Bank Column on the debit side. examples: On 15th Feb. 2017 a cheque is received from guepreet for ₹ 25000 this cheque was deposited into the bank on 20th Feb. 2017 On receipt of cheque the following journal entry will be passed:
On deposit of this cheque into bank on 20th Fer. 2017 it will be recorded on the debit side of cash book as follows.

Solution is as follow:

Cash Column in the Cash Book cannot show credit balance because cash payments cannot exceed cash in hand. At the most it can show nil balance when cash payments are equal to cash in hand.
Bank may allow to withdraw more amount than the deposited. If the bank allows the firm to withdraw more amount than the balance in the account, it is known as Overdraft. In such a case, total of the bank column on the credit side will be bigger than the total of debit side.

Contra Entry means withdrawal of cash from bank for official use or cash deposited in the bank. As both the accounts are in the Cash Book it is signified by writing 'C' in the column for Ledger Folio.

Cash and bank transactions are recorded in the Cash Book and on the basis of such record, Ledger Accounts are prepared. Therefore, Cash Book is a Subsidiary Book. Also. Cash Book by itself is Cash Account and Bank Account. The balances are entered in the Trial Balance directly. Cash Book, therefore, is a part of the Ledger also. Hence it is also a Principal Book.
Cash Book is, thus, both a Subsidiary Book and a Principal Book.

Transactions are recorded directly from source documents in the Cash Book, so there is no need to record transactions in the Journal book. Further, on the basis of the cash transactions recorded in the Cash Book, cash and bank balances can be determined, and so there is no need to prepare cash account (which is a part of ledger) separately. Thus, the Cash Book serves the purpose of both Journal as well as ledger.

1. Cash Book: To record receipts and payments of cash, including receipts into and payments from the bank.
2. Purchases Book: To record credit purchases of goods.
3. Sales Book: To record the credit sales of goods.
4. Purchases Return Book: To record the return of goods previously purchased on credit.
5. Sales Return Book: To record the return of credit sales made by customers.
6. Journal Proper: To record the transactions which cannot be recorded in any of the above books.

1. Credit purchase of plant and Machinery.
2. Credit sales of fixed assets.

The entry recorded in the books of account is not correct. A deposit into the bank is recorded on the Receipts side of the Cash Book in the bank column and cash deposited is payment, it is recorded on the Payments side of the Cash Book in the cash column.

Debit refers to the left side of an account and credit refers to the right side of an account. In the abbreviated form Dr. stands for debit and Cr. stands for credit. An item recorded on the debit side of an account is said to be debited to the account. An item recorded on the credit side of an account is said to be credited to the account.
Both debit and credit may represent either increase or decrease depending upon the nature of an account. The rules of debit and credit depend on the nature of account.

A form or letter sent by a seller to a buyer, stating that a certain amount has been credited to the buyer's account.
A credit note is issued in various situations to correct a mistake, such as when:

1. An invoice amount is overstated.
2. Correct discount rate is not applied.
3. Goods spoil within guaranty period.
4. They do not meet the buyer's specifications and are returned. Also called credit memo.

Following are the three entries which are required to be passed even when all subsidiary books are maintained:

1. Purchase of Fixed Assets on Credit.
2. Making provisions for doubtful Debts.
3. Providing Depreciation on Assets.

In an enterprise there are number of transactions relating to incomes and expenses, which need to be adjusted so that, final accounts give true and fair view of the results. All such items which need to be adjusted when Final Accounts are prepared are called adjustments. Journal entries are passed giving effect to the adjustments. These entries are known as Adjusting Entries.

Purchases Return Book or Returns Outward Book is a subsidiary book maintained to record the goods or materials returned to the sellers of goods that were purchased on credit.Ruling of a Purchases Return Book is similar to the Purchases Book ruling except that instead of a column for 'Invoice No.' it has a column for Debit Note No.

Sales Return Book or Returns Inward Book is a subsidiary book maintained to record the goods or materials returned by the purchaser that had been sold on credit. This book is maintained if the return of goods is frequent otherwise it can be recorded in the Journal.

In this case the cash balance is increased and the bank balance is reduced On the Dr.the side 'To Bank A/c' is written and the amount is recorded in cash Column On the Cr.sid ;By Cash A/c' is written and the amount is recorded in Bank Column. Debit Cash A/c (As cash is coming in) Credit Cash A/c (As bank is the giver,i.e., credit the giver) For example, if we withdraw ₹ 2,500 form the bank it will be recorded in the cash book as follows.

It is deducted in the invoice from sale price and is not recorded in the books of account. Sale is recorded at the net value, i.e., sale price less trade discount. For example, Amit sells goods to Vikas of ₹ 10,000 allowing him trade discount of 20%. The invoice will be prepared for net amount ₹ 8,000, i.e., after trade discount. Amit will pass following Journal entry in his books of account:
Vikas will pass following journal entry in his books of account:

We credit a liablity ledger when the "Liability Increases". We should 'debit' the liability ledger when we want to reduce the balance in the liability account. For eg: Let us assume that, there is a Rent payable for ₹ 500. Outstanding Rent is a Liability.Then, the entry will be,

Rent A/c Dr.	₹ 500
To Outstanding Rent A/c	₹ 500

Here, when we credit O/S Rent A/c, Liability Increased. Now, the O/S Rent is paid through Cash. So, the entry will be,

Outstanding Rent A/c Dr.	₹ 500
To Cash A/c	₹ 500

Here, when O/S Rent is paid Liability has Decreased. So, it is debited.

Yes. Purchase is an Expense Account therefore, following the rule ‘Increase in expenses is debited and decrease credited.' Purchases Account is debited. Since, the Purchases Book contains records of credit purchases, the Supplier's Account is credited following the rule applicable to Liability Accounts, i.e., 'Increase in liabilities is credited and decrease debited.'

Yes. Sale is a revenue account and, therefore, following the rule 'Increase in revenue is credited and decrease debiteď Sales Account is credited. Since, the Sales Book contains records of credit sales, the Purchaser's Account (being debtors) is debited following the rule applicable to Asset Accounts, i.e., “Increase in assets is debited and decrease credited.

It is a journal since the transactions are recorded in it for the first time from the source documents and from there these are posted to the respective accounts in the ledger. The Cash book is also a ledger in the sense that it serves the purpose of a Cash account also. When a Cash book is prepared, no separate Cash account is opened in the ledger. As such, the Cash book is a journal as well as a ledger and hence it may be called “journalised ledger”.

Ledger folio is a page number of an account in ledger that is written in the L.F. column of a journal format. In journal entry, ledger folio number is written corresponding to the name of the account in the L.F. column. It helps in easy locating of the account in the ledger book. It reduces the time in recording and rechecking.

Since all cash transactions are recorded for the first time in the cash book, it is therefore called a book of original entry. When a cash book is maintained, transactions of Cash and Bank are not recorded in journal.

Purchase Book:
Purchase Return Book:

Although the Cash Book is a book of original entry, it is also a book where the Cash Account and Bank Account are maintained. In effect, it is both a book of original entry and a Ledger dedicated to those accounts. As a result, each transaction in the Cash Book is posted only once to another account.

Personal Accounts: Accounts which relate to persons, i.e., individuals, firms, companies, debtors or creditors, etc., are Personal Accounts. Examples of Personal Accounts are the account of Ram & Co., a customer (Debtor), or the account of Jhaveri & Co., a supplier of goods (Creditor), Capital Account and Drawings Account of the proprietor. The main purpose of preparing a Personal Account is to determine the balance due to or due from persons or organisations.
Capital account is a personal account. because capital account is related to owner personal capital and thats why this is treated in the liabilities side of balance sheet.

CGST, SGST and IGST all these all collected from different types of transactions.

• CGST: It is collected on intra state supplies made (i.e. within the state).
• SGST: It is collected on intra state supplies made (i.e. within the state).
• IGST: It is collected on inter state supplies made (i.e. outside the state).

So, in order to get a clear presentation of all the adjustments these accounts are maintained separately.

Business transactions are large in number and difficult to record; so, journal is sub-divided for quick, efficient and accurate recording of the business transactions. Special purpose books like, sales book and purchases book are maintained for those transactions that are routine and repetitive in nature. Recording through these books is economical and enables division of work among accountants.

Contra Entry: Contra entries are the entries which affect both cash and bank, i.e., balance of one will decrease and the other will increase due to such transactior s. Such transactions are recorded on both sides of the Cash Book. Let us take an example to understand it better. Against such entries, the letter 'C' is written in the L.F. column to indicate thot these are contra transactions and are not posted in the Ledger Account.

Cash Discount is a discount allowed by the seller of goods to encourage prompt or early payment. The usual method to encourage payment within the specific time, the seller allows cash discount say @ 2% of invoice value to the buyer. Cash discount is calculated after deducting trade discount from the invoice price. In other words, cash discount is calculated always on net amount.

Contra Entry: Contra entries are the entries which affect both cash and bank, i.e., balance of one will decrease and the other will increase due to such transactior s. Such transactions are recorded on both sides of the Cash Book. Let us take an example to understand it better.

Cash Discount Allowed is an expense and is debited to Discount Allowed Account. It is closed by transferring it to the Profit and Loss Account. Similarly, Cash Discount Received is an income and is credited to Discount Received Account which is transferred to Profit and Loss Account.

Opening Entry: Opening entry is recorded in the beginning of a financial year to open the books by debiting assets and crediting liabilities and the capital appearing in the Balance Sheet of the previous year.

Contra entry represents deposits or withdrawals of cash from bank or vice versa. The purpose of contra entry is to indicate the transactions that effect both cash and bank balances. This entry does not affect the financial positions of a business. A contra entry is recorded in both sides of a two column Cash Book and is denoted by ‘C’ in the ledger folio column.

It is credited because at the time of purchase GST Paid on these goods was debited to Input GST (CGST and SGST or IGST) Account. The goods are not sold but have reached their final destination, i.e., will not be sold further. Therefore, GST (CGST and SGST or IGST) is credited.

Basis of Difference	Trade Discount	Cash Discount
Meaning	It is allowed when goods are purchase or sold.	It is allowed at the time of payment.
Recording in books	It is recorded in invoice/ bill but not in the books.	It is recorded in the discount column of the Cash Book’s debit side, if allowed, and credit side, if received.
Purpose	It is allowed to increase sale.	It is allowed for earlier payment.
Deduction	It is deducted from the price-list of the goods.	It is not deducted from the price-list of the goods.