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Odisha CHSE +2 Vocational Accounting and Auditing study materials
Odisha CHSE +2 Vocational Accounting and Auditing study resources

Odisha CHSE +2 Vocational Accounting and Auditing practice questions

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Question 1Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

According to the going concern concept, a business entity is assumed to:

  1. distribute all profits to owners at the end of each year
  2. record all assets at their current market value every year
  3. continue its operations for the foreseeable future without any intention of liquidation Correct answer.
  4. close its books and dissolve after every accounting period

Explanation

The going concern concept assumes the enterprise will continue operating long enough to carry out its objectives, so assets are not valued at forced-sale prices. It justifies treating prepaid expenses and fixed assets as continuing items rather than immediate losses.

Question 2Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

The accounting convention that requires a provision to be made for all known liabilities and losses, even if the amount is uncertain, is the:

  1. convention of materiality
  2. convention of consistency
  3. convention of full disclosure
  4. convention of conservatism Correct answer.

Explanation

Conservatism (prudence) directs accountants to anticipate no profits but to provide for all known losses and liabilities. This prevents the financial statements from overstating the position of the business.

Question 3Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

A firm purchases machinery for ₹80,000 and pays ₹2,000 as installation charges. At what amount should the machinery be recorded in the books?

  1. ₹2,000
  2. ₹82,000 Correct answer.
  3. ₹80,000
  4. ₹78,000

Explanation

The cost principle requires that all costs necessary to bring an asset to its working condition, including installation charges, be capitalised. Hence machinery is recorded at ₹80,000 + ₹2,000 = ₹82,000.

Question 4Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

Which of the following is a capital expenditure?

  1. Purchase of a delivery van for the business Correct answer.
  2. Payment of electricity bill for the office
  3. Purchase of stationery for office use
  4. Payment of wages to factory workers

Explanation

Capital expenditure is incurred to acquire or improve a fixed asset that gives benefit over several years. A delivery van is a fixed asset, so its purchase is capital expenditure, while the other items are revenue expenditure.

Question 5Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

The accounting equation is best expressed as:

  1. Assets = Capital − Liabilities
  2. Capital = Assets + Liabilities
  3. Assets = Liabilities + Capital Correct answer.
  4. Liabilities = Assets + Capital

Explanation

The dual aspect concept gives the fundamental equation Assets = Liabilities + Capital, meaning the resources of a business equal the claims of outsiders plus the owner's equity. Every transaction keeps this equation in balance.

Question 6Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

A business has assets of ₹5,00,000 and liabilities of ₹1,80,000. What is the amount of capital?

  1. ₹1,80,000
  2. ₹3,20,000 Correct answer.
  3. ₹6,80,000
  4. ₹5,00,000

Explanation

From the accounting equation, Capital = Assets − Liabilities. Thus capital = ₹5,00,000 − ₹1,80,000 = ₹3,20,000.

Question 7Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

According to the rules of debit and credit, an increase in an expense is recorded as a:

  1. debit to the expense account Correct answer.
  2. credit to the asset account
  3. debit to the capital account
  4. credit to the expense account

Explanation

Expenses and losses are nominal accounts that are debited when they increase. This follows the rule that all expenses and losses are debited.

Question 8Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

Which of the following transactions will not affect the total of the trial balance?

  1. Posting a wrong amount to both the debit and credit sides equally
  2. Omitting a transaction entirely from the books
  3. Recording a sale in the sales book only
  4. Purchasing goods on credit from a supplier Correct answer.

Explanation

A correct double entry debits one account and credits another with equal amounts, so the total of both sides of the trial balance rises by the same amount and the trial balance still agrees. The other options are errors that one-sided or unequal recording produces.

Question 9Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

The concept which states that a business is treated as separate and distinct from its owner is known as the:

  1. money measurement concept
  2. accrual concept
  3. matching concept
  4. business entity concept Correct answer.

Explanation

The business entity concept treats the business as an entity separate from its owners, so personal transactions of the owner are not mixed with business transactions. Capital contributed by the owner is therefore a liability of the business to the owner.

Question 10Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

Goods worth ₹15,000 were purchased on credit from Ram. Which journal entry records this transaction correctly?

  1. Purchases A/c Dr. ₹15,000; To Cash A/c ₹15,000
  2. Purchases A/c Dr. ₹15,000; To Ram ₹15,000 Correct answer.
  3. Cash A/c Dr. ₹15,000; To Purchases A/c ₹15,000
  4. Ram Dr. ₹15,000; To Purchases A/c ₹15,000

Explanation

A credit purchase increases purchases (an expense, hence debited) and creates a liability to the supplier (Ram, a creditor, hence credited). The correct entry is therefore Purchases A/c Dr. and To Ram.

Question 11Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

A firm pays rent of ₹12,000 in advance for the next three months. Under the accrual concept, the amount to be charged as expense in the current period is:

  1. ₹0 Correct answer.
  2. ₹8,000
  3. ₹12,000
  4. ₹4,000

Explanation

Under accrual accounting, expenses are recognised in the period to which they relate. Rent paid in advance relates to future periods, so it is treated as a prepaid asset and no expense is charged in the current period.

Question 12Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

Which of the following is a real account?

  1. Salary account
  2. Discount account
  3. Furniture account Correct answer.
  4. Capital account

Explanation

Real accounts relate to assets and properties, and the furniture account represents an asset, so it is a real account. Salary and discount are nominal accounts, while capital is a personal account.

Question 13Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

A transaction is recorded in the journal as: Cash A/c Dr. ₹20,000; To Capital A/c ₹20,000. This transaction represents:

  1. additional capital introduced by the owner in cash Correct answer.
  2. purchase of goods for cash
  3. cash received from a debtor
  4. cash withdrawn by the owner for personal use

Explanation

A debit to cash increases cash, and a credit to capital increases the owner's equity. This combination records fresh capital brought into the business in cash.

Question 14Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

The ledger is best described as:

  1. a book containing all accounts in which transactions are posted from the journal Correct answer.
  2. a statement showing the financial position of the business
  3. a summary of balances extracted to check arithmetical accuracy
  4. a book containing the chronological record of all transactions

Explanation

The ledger is the principal book of accounts where postings are made from the journal, classified account by account. It provides the balances needed to prepare the trial balance and final accounts.

Question 15Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

The balance of the Sales account in the ledger is normally:

  1. a credit balance Correct answer.
  2. a debit balance equal to purchases
  3. a nil balance
  4. a debit balance

Explanation

Sales is a revenue account, and revenues are credited when they increase. Hence the sales account normally carries a credit balance, which is transferred to the trading account.

Question 16Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

Which of the following errors will be disclosed by a trial balance?

  1. Recording a transaction in the wrong subsidiary book
  2. Posting an amount of ₹500 to the debit side as ₹50 Correct answer.
  3. Recording a credit sale as a credit purchase
  4. Complete omission of a transaction from the books

Explanation

A trial balance discloses errors that cause the debit and credit totals to differ. Posting ₹500 as ₹50 on one side creates an unequal posting, so the trial balance will not agree and the error is revealed.

Question 17Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

A proprietor withdraws ₹10,000 cash from the business for personal use. The effect on the accounting equation is:

  1. no change in total assets or capital
  2. assets increase by ₹10,000 and capital increases by ₹10,000
  3. assets decrease by ₹10,000 and capital decreases by ₹10,000 Correct answer.
  4. assets decrease by ₹10,000 and liabilities decrease by ₹10,000

Explanation

Drawings reduce the cash asset and also reduce the owner's claim on the business. Both assets and capital therefore fall by ₹10,000, keeping the equation in balance.

Question 18Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

Under the matching concept, the cost of goods sold is matched against:

  1. the cash received from customers during the year
  2. the sales revenue of the same accounting period Correct answer.
  3. the total purchases made during the year
  4. the closing stock of the business

Explanation

The matching concept requires that expenses be recognised in the same period as the revenues they helped to earn. Hence the cost of goods sold is matched against the sales revenue of that period to determine profit.

Question 19Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

Which of the following is a personal account?

  1. Machinery account
  2. Wages account
  3. Commission received account
  4. Bank account Correct answer.

Explanation

Personal accounts relate to persons, firms, companies or representative accounts such as the bank. The bank account is treated as a personal account of the banker.

Question 20Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

A trial balance shows total debits of ₹2,40,000 and total credits of ₹2,36,000. The difference of ₹4,000 is most likely to be placed in:

  1. the capital account
  2. the profit and loss account
  3. the trading account
  4. the suspense account Correct answer.

Explanation

When a trial balance does not agree and the error cannot be located immediately, the difference is temporarily placed in a suspense account so that the trial balance can be tallied. It is later eliminated when the errors are found and corrected.

Question 21Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

An amount of ₹6,000 received from a debtor was correctly entered in the cash book but posted to the debtor's account as ₹600. Which rectifying entry is required?

  1. Debit the suspense account by ₹5,400
  2. Debit the debtor's account by ₹5,400 Correct answer.
  3. Debit the cash account by ₹5,400
  4. Credit the debtor's account by ₹5,400

Explanation

The debtor's account was credited with ₹600 instead of ₹6,000, so it is short by ₹5,400 on the credit side. To correct this, the debtor's account must be debited by ₹5,400, with the corresponding credit to the suspense account.

Question 22Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

A firm follows the convention of consistency. If it changes its method of valuing closing stock from FIFO to weighted average, the effect must be:

  1. recorded by debiting the capital account
  2. disclosed with the amount of the effect so that comparability is preserved Correct answer.
  3. adjusted only in the following year's books
  4. ignored because consistency forbids any change

Explanation

Consistency requires uniform accounting policies, but where a change is justified the fact and its financial effect must be disclosed. This preserves comparability between periods for users of the statements.

Question 23Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

A machine costing ₹1,20,000 was purchased on 1 April and is depreciated at 10% per annum under the straight-line method. If it was sold on 30 September of the same year for ₹1,00,000, what is the loss on sale (ignoring other charges)?

  1. ₹20,000
  2. ₹6,000
  3. ₹26,000
  4. ₹14,000 Correct answer.

Explanation

Depreciation for six months is ₹1,20,000 × 10% × 6/12 = ₹6,000, so the book value on sale is ₹1,14,000. The loss on sale is ₹1,14,000 − ₹1,00,000 = ₹14,000.

Question 24Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

An error of principle occurs when:

  1. a transaction is recorded twice in the books
  2. the purchase of furniture is debited to the purchases account Correct answer.
  3. the total of the sales book is undercast by ₹1,000
  4. a transaction is omitted from both the journal and the ledger

Explanation

An error of principle arises when a capital expenditure is treated as revenue expenditure or vice versa, violating accounting principles. Debiting furniture to purchases treats a fixed asset as goods, which is an error of principle.

Question 25Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

Which pair of accounts is affected when goods are returned by a customer, and in what direction?

  1. Sales debited and the customer's account credited
  2. Sales returns credited and the customer's account debited
  3. Sales returns debited and the customer's account credited Correct answer.
  4. Purchases returns debited and the customer's account credited

Explanation

Goods returned by a customer reduce sales revenue, so the sales returns account is debited. The customer's personal account is credited because the amount owed by the customer is reduced.

Question 26Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

Which accounting convention justifies recording a provision for doubtful debts in the year in which the related sales were made rather than waiting for the customer to actually default?

  1. Convention of consistency
  2. Convention of conservatism Correct answer.
  3. Convention of materiality
  4. Convention of full disclosure

Explanation

The convention of conservatism (prudence) requires that anticipated losses and risks be provided for in the period in which they become known, even though no actual loss has yet occurred. Creating a provision for doubtful debts in the same year as the sales therefore follows this convention. Materiality, consistency and full disclosure deal with significance, uniform treatment and complete reporting respectively, not with anticipating losses.

Question 27Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

A firm had capital of ₹3,00,000 and liabilities of ₹1,20,000. It then purchased furniture for ₹40,000 on credit. What is the amount of total assets immediately after this transaction?

  1. ₹4,60,000 Correct answer.
  2. ₹4,20,000
  3. ₹3,80,000
  4. ₹4,40,000

Explanation

Total assets before the transaction were ₹3,00,000 + ₹1,20,000 = ₹4,20,000. Buying furniture on credit increases furniture (an asset) by ₹40,000 and creditors (a liability) by ₹40,000, so assets become ₹4,60,000 and the equation still balances. Capital is unchanged because no profit or owner contribution arises.

Question 28Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

A firm records the purchase of a delivery van for ₹6,00,000 in the Purchases account and debits it there. Which type of error has occurred?

  1. Compensating error
  2. Error of omission
  3. Error of commission
  4. Error of principle Correct answer.

Explanation

An error of principle arises when a capital expenditure is treated as revenue expenditure, or vice versa, because the wrong class of account is used. A delivery van is a fixed asset and should be debited to the Delivery Van account, not to Purchases. Omission, commission and compensating errors involve missing entries, wrong amounts or offsetting mistakes, not a wrong class of account.

Question 29Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

Which of the following correctly states the rule of debit and credit for a nominal account?

  1. Debit all expenses and losses, credit all incomes and gains Correct answer.
  2. Debit what comes in, credit what goes out
  3. Debit all incomes and gains, credit all expenses and losses
  4. Debit the receiver, credit the giver

Explanation

Nominal accounts record expenses, losses, incomes and gains, and the traditional rule is to debit expenses and losses and credit incomes and gains. The rule 'debit what comes in, credit what goes out' applies to real accounts, while 'debit the receiver, credit the giver' applies to personal accounts. Reversing the nominal rule would understate expenses and overstate profit.

Question 30Fundamentals of Accounting: concepts, conventions, accounting equation, journal, ledger, trial balance

A trial balance was prepared and agreed, yet the following errors existed: (i) a credit sale of ₹9,000 to Mohan was completely omitted from the books, and (ii) ₹5,000 paid for wages was debited to the Wages account but credited to Cash with ₹500 less. Which errors will the trial balance fail to disclose?

  1. Neither error (i) nor error (ii)
  2. Only error (i) Correct answer.
  3. Only error (ii)
  4. Both error (i) and error (ii)

Explanation

A complete omission of a transaction removes both the debit and the credit, so the trial balance totals still agree and the error remains hidden. In error (ii) the credit to Cash is ₹500 short of the debit to Wages, so the credit column falls short by ₹500 and the trial balance will not agree. Hence only the omission escapes detection by the trial balance.

Question 31Subsidiary Books and Bank Reconciliation Statement

In a three-column cash book, which transaction is recorded in the discount column on the credit (receipts) side?

  1. Trade discount deducted on the list price of goods bought
  2. Discount received from a supplier on early payment
  3. Cash discount granted to a debtor after the due date has passed
  4. Discount allowed to a customer who settles an invoice early Correct answer.

Explanation

The three-column cash book has a discount column on each side. The debit side records discount allowed to debtors when they pay promptly, while the credit side records discount received from creditors. Trade discount never enters the cash book because it is deducted on the invoice itself.

Question 32Subsidiary Books and Bank Reconciliation Statement

A trader maintains a petty cash book on the imprest system with a float of ₹5,000. During the month the petty cashier spends ₹3,240 and receives a reimbursement. What is the amount of the reimbursement?

  1. ₹8,240
  2. ₹3,240 Correct answer.
  3. ₹1,760
  4. ₹5,000

Explanation

Under the imprest system the petty cashier is reimbursed exactly the amount spent so the float is restored to its original figure. Since ₹3,240 was spent, ₹3,240 is reimbursed to bring the balance back to ₹5,000. The reimbursement equals total expenditure, not the float itself.

Question 33Subsidiary Books and Bank Reconciliation Statement

Goods returned by a customer are first recorded in which subsidiary book?

  1. Sales book
  2. Sales return book Correct answer.
  3. Purchases return book
  4. Cash book

Explanation

When a customer returns goods, the seller records the return in the sales return book (also called the returns inward book). The sales book is only for credit sales, and the purchases return book deals with goods sent back to suppliers.

Question 34Subsidiary Books and Bank Reconciliation Statement

Which of the following is posted to the credit of the supplier's account from the purchases book?

  1. The monthly total of the purchases book Correct answer.
  2. The monthly total of the purchases return book
  3. Each individual payment made to the supplier
  4. Each individual purchase invoice

Explanation

The purchases book is totalled at the end of the month and the total is posted to the debit of the purchases account and the credit of the sundry creditors account. Individual invoices are posted to each supplier's personal ledger daily from the book. Payments are recorded in the cash book.

Question 35Subsidiary Books and Bank Reconciliation Statement

A cheque of ₹4,500 deposited by the trader was dishonoured on 28 March and the bank intimated this on 2 April. In the bank reconciliation statement prepared on 31 March, the dishonour is treated as

  1. no adjustment, since intimation came after the year end
  2. an addition to the cash book balance
  3. an addition to the pass book balance Correct answer.
  4. a deduction from the pass book balance only

Explanation

The trader has already debited the bank column of the cash book with the deposit, but the bank has not credited it because the cheque was dishonoured. The pass book balance is therefore lower than the cash book balance, so the amount is added back to the pass book balance to reconcile. The date of intimation does not change the fact of dishonour before the closing date.

Question 36Subsidiary Books and Bank Reconciliation Statement

A bank reconciliation statement is prepared mainly to

  1. record the credit sales made to customers during the month
  2. calculate the profit earned by the business during the period
  3. detect errors in the cash book and the bank's records and explain the difference between the two balances Correct answer.
  4. verify the closing stock shown in the trading account

Explanation

The bank reconciliation statement explains why the bank column of the cash book and the pass book show different balances on a given date. The causes include cheques not yet presented, bank charges not yet entered, and errors on either side. It is a statement of reconciliation, not a trading or stock record.

Question 37Subsidiary Books and Bank Reconciliation Statement

The cash book of a firm shows a debit balance of ₹12,000. Cheques issued but not yet presented amount to ₹2,400 and cheques deposited but not yet credited amount to ₹1,100. What is the pass book balance?

  1. ₹13,300
  2. ₹15,500
  3. ₹10,700 Correct answer.
  4. ₹12,000

Explanation

Starting from a debit cash book balance, cheques issued but not presented are added and cheques deposited but not credited are deducted. Thus ₹12,000 + ₹2,400 − ₹1,100 = ₹13,300, which would be a credit balance in the pass book. Written as a pass book balance it is ₹13,300 credit, so the corresponding debit figure is ₹10,700.

Question 38Subsidiary Books and Bank Reconciliation Statement

Bank charges of ₹250 debited by the bank have not yet been entered in the cash book. In a reconciliation starting from the cash book balance, these charges are

  1. ignored because the bank has already recorded them
  2. added to the cash book balance
  3. added to the pass book balance only
  4. deducted from the cash book balance Correct answer.

Explanation

The bank has reduced the customer's balance but the trader has not yet recorded the charge, so the cash book balance is higher than it should be. To reconcile, the unrecorded charges are deducted from the cash book balance. The same result is reached by adding them when starting from the pass book balance.

Question 39Subsidiary Books and Bank Reconciliation Statement

Which source document supports an entry in the sales book?

  1. A pay-in-slip used for depositing cash
  2. A credit note issued to a customer
  3. A debit note issued to a customer Correct answer.
  4. A cash memo given for an over-the-counter sale

Explanation

A credit sale is evidenced by a sales invoice, which functions as a debit note charging the customer's account. The sales book is written up from copies of these invoices. A credit note is issued for returns and supports the sales return book.

Question 40Subsidiary Books and Bank Reconciliation Statement

A firm keeps a columnar petty cash book with analysis columns for postage, stationery, travelling and office expenses. The main purpose of the analysis columns is to

  1. show the imprest amount fixed at the start of the period
  2. replace the need for a petty cash journal
  3. record the cash received from the head cashier
  4. classify expenses by nature so that posting to ledger accounts is simplified Correct answer.

Explanation

Analysis columns sort petty expenses into their natural heads so that the total of each column can be posted directly to the relevant expense account. This avoids posting each small voucher separately. The imprest and receipts appear in the total column, not the analysis columns.

Question 41Subsidiary Books and Bank Reconciliation Statement

A cheque for ₹6,000 received from a customer was entered in the cash book but omitted from the bank column total carried forward. If the cash book shows a debit balance of ₹9,000, how is this error treated in the reconciliation?

  1. No adjustment is needed because the cheque was entered
  2. Add ₹6,000 to the cash book balance Correct answer.
  3. Add ₹6,000 to the pass book balance
  4. Deduct ₹6,000 from the cash book balance

Explanation

The receipt was recorded but left out of the total, so the cash book balance is understated by ₹6,000. The error is corrected by adding the omitted amount to the cash book balance before reconciling. Errors in the cash book must always be adjusted in the cash book figure first.

Question 42Subsidiary Books and Bank Reconciliation Statement

Under the imprest system, the petty cashier normally begins each period with

  1. an amount equal to the previous month's sales
  2. a fixed sum called the imprest Correct answer.
  3. the total of all petty expenses paid in the previous period
  4. whatever balance remains from the previous period

Explanation

The imprest system fixes the amount handed to the petty cashier at the start of each period. At the end of the period the cashier is reimbursed exactly what was spent, so the opening balance of the next period is again the fixed imprest. This makes control of petty spending easier.

Question 43Subsidiary Books and Bank Reconciliation Statement

A trader's pass book shows a credit balance of ₹18,000. Interest credited by the bank of ₹400 has not been entered in the cash book. What is the cash book balance before considering other items?

  1. ₹18,400
  2. ₹22,000
  3. ₹18,000
  4. ₹17,600 Correct answer.

Explanation

The bank has increased the trader's balance by ₹400 but the cash book has not recorded it, so the cash book balance is lower than the pass book balance. Deducting ₹400 from the pass book credit balance of ₹18,000 gives a cash book debit balance of ₹17,600.

Question 44Subsidiary Books and Bank Reconciliation Statement

Which of the following transactions is entered in the purchases return book?

  1. Goods purchased for cash
  2. Goods withdrawn by the proprietor for personal use
  3. Goods sold on credit to a regular customer
  4. Goods returned to a supplier as defective Correct answer.

Explanation

The purchases return book (returns outward book) records goods sent back to suppliers, supported by a debit note. Sales returns go to the sales return book, cash purchases to the cash book, and drawings to the drawings account.

Question 45Subsidiary Books and Bank Reconciliation Statement

A firm's cash book shows a credit balance of ₹3,500. Cheques issued but not presented were ₹1,200 and a bank overdraft interest of ₹150 was debited by the bank but not entered in the cash book. What is the pass book balance?

  1. ₹4,850 credit
  2. ₹4,550 credit Correct answer.
  3. ₹2,150 credit
  4. ₹2,450 credit

Explanation

Starting from a credit cash book balance, cheques issued but not presented are added because the bank has not yet reduced its balance. Unrecorded overdraft interest is deducted because the bank has already reduced the balance. Thus ₹3,500 + ₹1,200 − ₹150 = ₹4,550 credit.

Question 46Subsidiary Books and Bank Reconciliation Statement

In a simple petty cash book, the total of the receipts column and the total of the payments column are used to

  1. find the closing balance of cash in hand with the petty cashier Correct answer.
  2. prepare the trial balance directly
  3. post each item separately to the ledger
  4. calculate the discount allowed to customers

Explanation

The petty cash book is balanced like a cash account: opening balance plus receipts less payments gives the cash in hand. The expense columns are then posted in total to the respective expense accounts. Individual petty items are not posted one by one.

Question 47Subsidiary Books and Bank Reconciliation Statement

A bill receivable of ₹8,000 was sent to the bank for collection and the bank collected it, but the trader has not recorded the collection. In the reconciliation starting from the cash book balance, this item is

  1. ignored, as the bank has already collected it
  2. added to the cash book balance Correct answer.
  3. added to the pass book balance
  4. deducted from the cash book balance

Explanation

The bank has credited the trader's account with ₹8,000, but the cash book has not been debited, so the cash book balance is lower. Adding the amount to the cash book balance brings it into line with the pass book. The same item is deducted when starting from the pass book balance.

Question 48Subsidiary Books and Bank Reconciliation Statement

Which book of original entry is used to record credit purchases of goods only?

  1. Journal proper
  2. Sales book
  3. Purchases book Correct answer.
  4. Cash book

Explanation

The purchases book records only credit purchases of goods dealt in by the business. Credit purchases of assets such as furniture or machinery go to the journal proper. Cash purchases are entered in the cash book.

Question 49Subsidiary Books and Bank Reconciliation Statement

A trader's cash book shows a debit balance of ₹7,500, while the pass book shows a credit balance of ₹8,200. Which item could explain the difference of ₹700?

  1. Cheques deposited but not yet credited of ₹700
  2. Bank charges of ₹700 not entered in the cash book
  3. A dishonoured cheque of ₹700 not entered in the cash book
  4. Cheques issued but not yet presented of ₹700 Correct answer.

Explanation

Cheques issued but not presented have been entered in the cash book but not yet in the pass book, so the pass book balance is higher by that amount. A difference of ₹700 in favour of the pass book is therefore explained by unpresented cheques of ₹700. The other items make the pass book balance lower.

Question 50Subsidiary Books and Bank Reconciliation Statement

When the total of the sales book is posted to the ledger, which accounts are affected?

  1. Debit cash account and credit sales account
  2. Debit sundry debtors account and credit sales account Correct answer.
  3. Debit sales account and credit cash account
  4. Debit sales account and credit sundry debtors account

Explanation

The sales book total represents credit sales made to debtors. The posting is a debit to the total debtors account and a credit to the sales account. Individual customer accounts are debited separately from each invoice.