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Tamil Nadu HSE Second Year Accountancy study materials
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Tamil Nadu HSE Second Year Accountancy practice questions

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Question 1Accounting Fundamentals and Basic Concepts

Which branch of accounting is mainly concerned with recording transactions and preparing final accounts for the owners of a business?

  1. Financial accounting Correct answer.
  2. Social accounting
  3. Cost accounting
  4. Management accounting

Explanation

Financial accounting records business transactions in the books of account and summarises them in the trading and profit and loss account and the balance sheet for the owners. Cost and management accounting serve internal decision-making, while social accounting reports on social performance.

Question 2Accounting Fundamentals and Basic Concepts

According to the dual aspect concept, which statement is true of every business transaction?

  1. It affects two or more accounts and the total debits equal the total credits. Correct answer.
  2. It affects only one account and leaves the other accounts unchanged.
  3. It affects only the cash account and the bank account.
  4. It must always involve the owner directly.

Explanation

The dual aspect concept states that every transaction has two aspects, a receiving aspect and a giving aspect, so at least two accounts are affected. The debits recorded must equal the credits, which is the foundation of the accounting equation and the trial balance.

Question 3Accounting Fundamentals and Basic Concepts

A firm purchases machinery for cash. Which pair of accounts is affected?

  1. Cash account and Drawings account
  2. Machinery account and Capital account
  3. Purchases account and Cash account
  4. Machinery account and Cash account Correct answer.

Explanation

Machinery is an asset that increases, so the machinery account is debited, and cash is an asset that decreases, so the cash account is credited. Both accounts affected are asset accounts, and no capital or purchases account is involved.

Question 4Accounting Fundamentals and Basic Concepts

Which of the following is a fundamental accounting assumption on which the preparation of financial statements rests?

  1. Matching concept
  2. Cost concept
  3. Dual aspect concept
  4. Going concern assumption Correct answer.

Explanation

The going concern assumption presumes that the business will continue to operate for the foreseeable future, which is why assets are shown at cost less depreciation rather than at break-up value. It is treated as a fundamental assumption, together with consistency and accrual, in the framework of accounting.

Question 5Accounting Fundamentals and Basic Concepts

A trader records his personal household expenses in the business books. Which accounting concept is violated?

  1. Business entity concept Correct answer.
  2. Matching concept
  3. Materiality concept
  4. Consistency concept

Explanation

The business entity concept treats the business as separate from its owner, so only business transactions belong in the books. Recording the owner's household expenses mixes personal and business affairs and therefore violates this concept.

Question 6Accounting Fundamentals and Basic Concepts

Under the money measurement concept, which item is normally excluded from the financial statements?

  1. The amount owed by a customer for goods sold on credit
  2. The skill and morale of the company's workforce Correct answer.
  3. The depreciation charged on factory machinery
  4. The salary paid to the sales manager

Explanation

The money measurement concept records only those events that can be expressed in monetary terms. The skill and morale of employees affect the business but cannot be measured reliably in money, so they are excluded from the financial statements.

Question 7Accounting Fundamentals and Basic Concepts

A firm charges depreciation on its machinery even though the machinery has risen in market value. Which concept best justifies this treatment?

  1. Cost concept Correct answer.
  2. Realisation concept
  3. Prudence concept
  4. Accrual concept

Explanation

The cost concept records assets at the price actually paid for them, not at their current market value. Depreciation is therefore charged on the historical cost of the machinery, and appreciation in market value is ignored until the asset is sold.

Question 8Accounting Fundamentals and Basic Concepts

A firm follows the reducing balance method for depreciation on one machine and the straight line method on another machine of the same class. Which accounting principle is being disregarded?

  1. Prudence
  2. Consistency Correct answer.
  3. Materiality
  4. Full disclosure

Explanation

Consistency requires that once a method of accounting is adopted, it should be applied uniformly from period to period so that results remain comparable. Using different depreciation methods for similar machines without justification breaks that comparability.

Question 9Accounting Fundamentals and Basic Concepts

Revenue from a credit sale is recorded in the year the goods are delivered, not in the year the cash is received. Which concept supports this treatment?

  1. Going concern concept
  2. Cost concept
  3. Cash basis concept
  4. Accrual concept Correct answer.

Explanation

The accrual concept recognises revenue when it is earned and expenses when they are incurred, regardless of when cash is received or paid. A credit sale is therefore recorded in the period in which the goods were delivered.

Question 10Accounting Fundamentals and Basic Concepts

Which of the following is a qualitative characteristic that makes financial information useful to users?

  1. Dual aspect
  2. Conservatism
  3. Comparability Correct answer.
  4. Business entity

Explanation

Comparability is a qualitative characteristic that enables users to identify similarities and differences between sets of financial information over time and across entities. It is listed among the qualitative characteristics of useful financial information.

Question 11Accounting Fundamentals and Basic Concepts

Which of the following is an example of a capital receipt?

  1. Commission received from a supplier
  2. Interest received on fixed deposit
  3. Cash received from the sale of an old delivery van Correct answer.
  4. Cash received from the sale of goods to a customer

Explanation

A capital receipt arises from the sale of a fixed asset or from the introduction of capital, and it is credited to the balance sheet rather than to the profit and loss account. Selling an old delivery van is a disposal of a fixed asset, so the proceeds are a capital receipt.

Question 12Accounting Fundamentals and Basic Concepts

The owner of a business withdrew cash for personal use. This is recorded as:

  1. A reduction of capital through the drawings account Correct answer.
  2. An expense in the profit and loss account
  3. A revenue receipt of the business
  4. A liability of the business

Explanation

Amounts withdrawn by the owner for personal use are drawings, which reduce the owner's capital. They are not a business expense, because the business entity concept treats the owner and the business as separate.

Question 13Accounting Fundamentals and Basic Concepts

Which of the following is an example of a deferred revenue expenditure?

  1. Rent paid in advance for the next year
  2. Salaries paid to office staff for the current month
  3. Loss of stock destroyed by fire
  4. Heavy advertising expenditure incurred to launch a new product Correct answer.

Explanation

Deferred revenue expenditure is a revenue-type outlay whose benefit extends over several years, so it is written off over those years rather than charged fully in one period. Heavy advertising to launch a product is the standard example of such expenditure.

Question 14Accounting Fundamentals and Basic Concepts

Which of the following best describes the matching concept?

  1. Assets are recorded at the price paid to acquire them.
  2. Expenses of a period are matched against the revenue earned in the same period to determine profit. Correct answer.
  3. Every debit must have a corresponding credit of equal amount.
  4. Only transactions capable of being expressed in money are recorded.

Explanation

The matching concept requires the expenses incurred in earning revenue to be charged against that revenue in the same accounting period. This is why adjustments are made for outstanding and prepaid items and for depreciation and closing stock.

Question 15Accounting Fundamentals and Basic Concepts

The accounting equation of a business is: Assets = Liabilities + Capital. If the business purchases goods on credit, what is the effect on this equation?

  1. Assets increase and capital increases.
  2. Assets decrease and liabilities decrease.
  3. Assets increase and liabilities increase. Correct answer.
  4. Capital increases and liabilities decrease.

Explanation

Buying goods on credit increases stock, an asset, and at the same time creates creditors, a liability. Both sides of the equation rise by the same amount, so the equation stays balanced without any change in capital.

Question 16Accounting Fundamentals and Basic Concepts

Which of the following is an internal user of accounting information?

  1. A bank considering a loan application
  2. The production manager of the company Correct answer.
  3. The income tax department
  4. A prospective investor

Explanation

Internal users are those within the organisation who use accounting information for planning, control and decision-making, such as managers and employees. The production manager needs cost and performance data to run the department efficiently.

Question 17Accounting Fundamentals and Basic Concepts

Which of the following is a limitation of financial accounting?

  1. It prepares a balance sheet at the end of the year.
  2. It records only monetary transactions and ignores non-monetary factors. Correct answer.
  3. It is based on the double entry system of book-keeping.
  4. It follows the accrual basis of accounting.

Explanation

A major limitation of financial accounting is that it records only events expressible in money and therefore ignores factors such as employee morale, customer loyalty and market competition. These non-monetary matters can strongly influence the future of the business but are not captured in the statements.

Question 18Accounting Fundamentals and Basic Concepts

A firm has been valuing its closing stock at cost, but in the current year it values stock at net realisable value, which is lower than cost. Which principle is applied?

  1. Materiality
  2. Prudence Correct answer.
  3. Realisation
  4. Consistency

Explanation

Prudence requires that anticipated losses be provided for while anticipated gains are not recognised until realised. Valuing closing stock at the lower of cost and net realisable value prevents the overstatement of profit and assets.

Question 19Accounting Fundamentals and Basic Concepts

Which of the following is a fundamental accounting assumption that requires the same accounting policies to be applied from one period to the next?

  1. Accrual
  2. Consistency Correct answer.
  3. Prudence
  4. Going concern

Explanation

Consistency is a fundamental accounting assumption that expects an enterprise to follow the same accounting policies and procedures from period to period. This allows meaningful comparison of results over time by users of the financial statements.

Question 20Accounting Fundamentals and Basic Concepts

Which of the following is a revenue expenditure?

  1. Installation charges paid on newly purchased machinery
  2. Whitewashing of the factory building Correct answer.
  3. Purchase of land for building a factory
  4. Legal fees paid to acquire a new office building

Explanation

Revenue expenditure is incurred for the day-to-day running of the business and its benefit is consumed within the accounting period, so it is charged to the profit and loss account. Whitewashing the factory building is a routine maintenance cost and is therefore revenue expenditure.

Question 21Journal, Ledger and Trial Balance

In the double entry system, which account is debited when goods are purchased for cash in a trading business?

  1. Sales account
  2. Capital account
  3. Purchases account Correct answer.
  4. Cash account

Explanation

Purchases is an expense (nominal) account and expenses are debited when they increase. Cash is an asset that decreases, so it is credited. The rule 'debit the receiver, credit the giver' is not applied here because neither party is a personal account.

Question 22Journal, Ledger and Trial Balance

A firm buys machinery for cash. Which journal entry correctly records this transaction?

  1. Purchases A/c Dr.; Cash A/c Cr.
  2. Machinery A/c Dr.; Cash A/c Cr. Correct answer.
  3. Cash A/c Dr.; Machinery A/c Cr.
  4. Machinery A/c Dr.; Capital A/c Cr.

Explanation

Machinery is a fixed asset, and assets are debited when they increase. Cash is an asset that decreases, so it is credited. The entry therefore debits Machinery and credits Cash.

Question 23Journal, Ledger and Trial Balance

Which of the following is a contra entry recorded in the cash book?

  1. Cash withdrawn from bank for office use Correct answer.
  2. Bad debts written off
  3. Salary paid by cheque
  4. Goods sold on credit to a customer

Explanation

A contra entry affects two accounts within the same cash book, namely cash and bank, so it is posted on both sides and marked 'C'. Withdrawal of cash from the bank for office use is the standard example.

Question 24Journal, Ledger and Trial Balance

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

  1. Posting an amount to the correct side but wrong account
  2. Omitting a transaction from the books entirely
  3. Wrong totaling of the sales returns book Correct answer.
  4. Recording a purchase of goods in the Sales book

Explanation

A trial balance agrees only when total debits equal total credits. An arithmetical error in a subsidiary book's total carries an unequal figure to the ledger and therefore disturbs the agreement. Errors of principle, omission and commission on the same side do not affect the totals.

Question 25Journal, Ledger and Trial Balance

Which of the following accounts normally carries a credit balance?

  1. Carriage inward account
  2. Discount allowed account
  3. Drawings account
  4. Provision for doubtful debts account Correct answer.

Explanation

A provision for doubtful debts is a charge against profits and is shown as a reduction from debtors, so it has a credit balance. Drawings and expenses such as discount allowed and carriage inward are debited and carry debit balances.

Question 26Journal, Ledger and Trial Balance

Goods worth Rs. 5,000 were returned by a customer. In which book is this transaction first recorded?

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

Explanation

When a customer returns goods, the seller records it in the sales return book, also called the returns inward book. The seller debits Sales Returns and credits the customer's personal account.

Question 27Journal, Ledger and Trial Balance

A trader's trial balance shows a debit balance of Rs. 8,000 in the Suspense account. Later it is found that a purchase of Rs. 8,000 had been posted to the credit of the supplier's account as Rs. 800. Which entry corrects this?

  1. Supplier's A/c Dr. Rs. 7,200; Suspense A/c Cr. Rs. 7,200 Correct answer.
  2. Supplier's A/c Dr. Rs. 8,000; Suspense A/c Cr. Rs. 8,000
  3. Purchases A/c Dr. Rs. 7,200; Supplier's A/c Cr. Rs. 7,200
  4. Suspense A/c Dr. Rs. 7,200; Supplier's A/c Cr. Rs. 7,200

Explanation

The supplier's account was credited Rs. 800 instead of Rs. 8,000, so it is short by Rs. 7,200 on the credit side. To add that amount, the supplier's account must be credited further, and the debit balance in Suspense is cleared by crediting Suspense.

Question 28Journal, Ledger and Trial Balance

A second-hand machine is purchased for Rs. 40,000 and Rs. 5,000 is spent on its installation. Which amount is debited to the Machinery account?

  1. Rs. 45,000 Correct answer.
  2. Rs. 5,000
  3. Rs. 35,000
  4. Rs. 40,000

Explanation

All costs necessary to bring an asset into working condition are capitalised. Installation charges are therefore added to the purchase price, giving Rs. 45,000 as the cost of the machine.

Question 29Journal, Ledger and Trial Balance

Which of the following is an error of principle?

  1. Posting a payment to Ram instead of Shyam
  2. Recording a credit sale of Rs. 2,000 as Rs. 200 in both accounts
  3. Omitting a cash sale from the cash book
  4. Debiting the purchase of a delivery van to the Purchases account Correct answer.

Explanation

An error of principle arises when a capital expenditure is treated as revenue expenditure or vice versa. Debiting a van, a fixed asset, to Purchases treats capital expenditure as revenue expenditure, so the trial balance still agrees but the accounts are wrong.

Question 30Journal, Ledger and Trial Balance

The debit column of a trial balance totals Rs. 1,20,000 and the credit column totals Rs. 1,15,000. The difference has been placed in a Suspense account. Which statement about this Suspense account is correct?

  1. It will not appear in the balance sheet
  2. It will show a credit balance of Rs. 5,000 Correct answer.
  3. It must be closed by transferring the difference to Capital
  4. It will show a debit balance of Rs. 5,000

Explanation

When the credit column is short, the Suspense account is credited with the difference so that the trial balance totals agree. A shortfall on the credit side therefore produces a credit balance in Suspense.

Question 31Journal, Ledger and Trial Balance

Goods costing Rs. 6,000 were given as a free sample to a customer. Which journal entry records this?

  1. Advertisement A/c Dr. Rs. 6,000; Purchases A/c Cr. Rs. 6,000 Correct answer.
  2. Cash A/c Dr. Rs. 6,000; Sales A/c Cr. Rs. 6,000
  3. Purchases A/c Dr. Rs. 6,000; Advertisement A/c Cr. Rs. 6,000
  4. Sales A/c Dr. Rs. 6,000; Purchases A/c Cr. Rs. 6,000

Explanation

Goods given away as free samples are not sold, so no sales entry arises. The cost of the goods is treated as an advertising expense, so Advertisement is debited and Purchases is credited to remove the goods from stock.

Question 32Journal, Ledger and Trial Balance

A firm maintains a three-column cash book. A cheque received from a customer is deposited in the bank on the same day. What is the effect of this deposit on the cash book?

  1. It is entered in both the cash and bank columns on the debit side
  2. It is entered as a contra entry on both sides
  3. It is entered in the bank column on the credit side
  4. It is entered in the bank column on the debit side only Correct answer.

Explanation

When a cheque is received and paid directly into the bank, only the bank column is affected. It is debited because bank balance increases, and no cash is handled at any stage.

Question 33Journal, Ledger and Trial Balance

The following balances appear in the ledger: Capital Rs. 60,000 (credit); Drawings Rs. 8,000 (debit); Purchases Rs. 45,000 (debit); Sales Rs. 70,000 (credit); Rent received Rs. 3,000 (credit). What is the total of the credit column of the trial balance?

  1. Rs. 1,33,000
  2. Rs. 1,30,000
  3. Rs. 1,38,000 Correct answer.
  4. Rs. 1,25,000

Explanation

The credit balances are Capital Rs. 60,000, Sales Rs. 70,000 and Rent received Rs. 3,000, giving Rs. 1,33,000. Purchases and Drawings are debit balances and must not be added here.

Question 34Journal, Ledger and Trial Balance

A debit note is issued by a buyer when goods are returned to the supplier. What is its accounting significance for the buyer?

  1. It replaces the invoice as the original record of purchase
  2. It is the document used to record cash sales
  3. It informs the supplier that the supplier's account has been debited Correct answer.
  4. It informs the customer that the customer's account has been debited

Explanation

A debit note is sent by the buyer to the seller to indicate that the seller's account has been debited with the value of goods returned. It supports the entry in the purchases return book.

Question 35Journal, Ledger and Trial Balance

A cheque of Rs. 4,000 received from a customer was dishonoured. The bank column of the cash book was already debited with it. Which entry rectifies the position?

  1. Bad Debts A/c Dr. Rs. 4,000; Customer's A/c Cr. Rs. 4,000
  2. Customer's A/c Dr. Rs. 4,000; Bank A/c Cr. Rs. 4,000 Correct answer.
  3. Bank A/c Dr. Rs. 4,000; Customer's A/c Cr. Rs. 4,000
  4. Cash A/c Dr. Rs. 4,000; Customer's A/c Cr. Rs. 4,000

Explanation

Dishonour reverses the earlier receipt, so the customer becomes a debtor again and is debited. The bank balance falls, so the bank column is credited. The entry is recorded on the credit side of the cash book in the bank column.

Question 36Journal, Ledger and Trial Balance

Which of the following is a compensating error that leaves the trial balance in agreement?

  1. Debiting Rs. 2,000 to Furniture and crediting Rs. 200 to Cash
  2. Overcasting the sales book by Rs. 1,000 and undercasting the purchases book by Rs. 1,000 Correct answer.
  3. Debiting a sale of Rs. 900 to the customer as Rs. 90
  4. Debiting Rs. 500 to Rent and crediting Rs. 500 to the landlord

Explanation

A compensating error occurs when two or more errors cancel each other's effect on the trial balance. An excess debit of Rs. 1,000 matched by an excess credit of Rs. 1,000 keeps the totals equal, so the trial balance agrees despite the mistakes.

Question 37Journal, Ledger and Trial Balance

A firm keeps a petty cash book on the imprest system with a float of Rs. 2,000. During the month, petty expenses of Rs. 1,350 were paid. How much is reimbursed at the start of the next month?

  1. Rs. 3,350
  2. Rs. 650
  3. Rs. 1,350 Correct answer.
  4. Rs. 2,000

Explanation

Under the imprest system, the petty cashier is reimbursed exactly the amount spent so that the float returns to the original figure. The reimbursement is therefore Rs. 1,350, and the closing balance before reimbursement is Rs. 650.

Question 38Journal, Ledger and Trial Balance

A trader sells goods on credit to Mohan for Rs. 10,000 and allows him a trade discount of 10% and a cash discount of 5% if paid within 15 days. Mohan pays within the discount period. What amount is finally received?

  1. Rs. 9,000
  2. Rs. 8,500
  3. Rs. 8,550 Correct answer.
  4. Rs. 9,500

Explanation

Trade discount is deducted first to arrive at the invoice price of Rs. 9,000. Cash discount is then calculated on that invoice price, giving a deduction of Rs. 450, so Rs. 8,550 is received.

Question 39Journal, Ledger and Trial Balance

A trial balance prepared on 31 March shows a difference which is placed in a Suspense account. Later it is discovered that the sales book was overcast by Rs. 3,000 and the purchases book was overcast by Rs. 3,000. What is the net effect on the trial balance?

  1. The debit column is short by Rs. 3,000
  2. The trial balance agrees because the two errors cancel out Correct answer.
  3. The credit column is short by Rs. 3,000
  4. The debit column is short by Rs. 6,000

Explanation

Overcasting the sales book inflates the credit side by Rs. 3,000, while overcasting the purchases book inflates the debit side by the same amount. The two errors are compensating, so the totals remain equal and no Suspense account is needed.

Question 40Journal, Ledger and Trial Balance

A firm's trial balance shows a debit balance of Rs. 12,000 in Suspense. Investigation reveals that goods returned by a customer worth Rs. 12,000 were entered in the purchases return book. Which rectifying entry is required?

  1. Suspense A/c Dr. Rs. 12,000; Sales Return A/c Cr. Rs. 12,000
  2. Customer's A/c Dr. Rs. 12,000; Suspense A/c Cr. Rs. 12,000
  3. Sales Return A/c Dr. Rs. 12,000; Purchases Return A/c Cr. Rs. 12,000 Correct answer.
  4. Purchases Return A/c Dr. Rs. 12,000; Sales Return A/c Cr. Rs. 12,000

Explanation

The transaction should have been debited to Sales Return and credited to the customer; instead Purchases Return was debited. Rectification therefore debits Sales Return and credits Purchases Return to cancel the wrong debit, and the Suspense account is cleared separately.

Question 41Subsidiary Books and Bank Reconciliation Statement

In the triple column cash book, which column records the discount allowed by the business to its customers?

  1. Bank column on the debit side
  2. Discount column on the debit side Correct answer.
  3. Discount column on the credit side
  4. Cash column on the credit side

Explanation

Discount allowed is a loss to the business and is granted when cash or a cheque is received from a debtor, so it is written in the discount column on the debit side. Discount received, being a gain, appears in the discount column on the credit side. The cash and bank columns record only money actually received or paid.

Question 42Subsidiary Books and Bank Reconciliation Statement

A firm's cash book shows a debit balance of Rs. 12,000. Which statement about the balance as per the cash book is correct?

  1. It represents the amount owed to suppliers
  2. It represents an overdraft with the bank
  3. It represents cash and bank funds available with the firm Correct answer.
  4. It represents the total of credit sales for the period

Explanation

A debit balance in the cash book means receipts exceed payments, so the firm holds that much cash and bank balance. A credit balance would indicate an overdraft or excess of payments. Credit sales and amounts owed to suppliers are recorded in the sales and purchases books, not in the cash book balance.

Question 43Subsidiary Books and Bank Reconciliation Statement

Which book is used to record credit purchases of goods only, excluding assets bought on credit?

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

Explanation

The purchases book, also called the purchases day book, records only credit purchases of goods meant for resale. Credit purchases of assets such as machinery are not goods and go to the journal proper. Cash purchases are recorded in the cash book.

Question 44Subsidiary Books and Bank Reconciliation Statement

A cheque deposited into the bank is dishonoured. In the cash book, this is recorded by:

  1. Debiting both the bank column and the customer's account
  2. Crediting the customer's account and crediting the bank column
  3. Debiting the bank column and crediting the customer's account Correct answer.
  4. Debiting the customer's account and crediting the bank column

Explanation

When a deposited cheque is dishonoured, the bank balance falls, so the bank column on the credit side is written up, and the customer again becomes a debtor, so the customer's account is debited. The entry is therefore to debit the customer and credit the bank column. This reverses the earlier receipt entry.

Question 45Subsidiary Books and Bank Reconciliation Statement

In a bank reconciliation statement, bank charges debited by the bank but not yet entered in the cash book are:

  1. Added to the cash book balance
  2. Added to the pass book balance only
  3. Ignored until the next year
  4. Deducted from the cash book balance Correct answer.

Explanation

Bank charges reduce the balance at the bank but have not yet been recorded in the firm's cash book, so the cash book balance is higher than the pass book. To reconcile, the charges are deducted from the cash book balance. The same treatment applies to interest on overdraft debited by the bank.

Question 46Subsidiary Books and Bank Reconciliation Statement

Which of the following is prepared by the bank and sent to the customer to show the customer's account as per the bank's books?

  1. Bank reconciliation statement
  2. Pass book Correct answer.
  3. Cash book
  4. Petty cash book

Explanation

The pass book is the bank's copy of the customer's account, showing deposits, withdrawals and the balance as per the bank's records. The cash book is maintained by the customer, and the bank reconciliation statement is prepared by the customer to explain differences between the two.

Question 47Subsidiary Books and Bank Reconciliation Statement

A trader purchased goods on credit from Ravi for Rs. 8,000. In which book is this transaction first recorded?

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

Explanation

A credit purchase of goods for resale is a routine transaction recorded in the purchases book from the supplier's invoice. The cash book is only for cash and bank receipts and payments. The journal proper is reserved for transactions that no special book covers.

Question 48Subsidiary Books and Bank Reconciliation Statement

The cash book of a firm shows a debit balance of Rs. 15,000. Cheques amounting to Rs. 4,000 were issued but not yet presented for payment. What is the balance as per the pass book?

  1. Rs. 11,000
  2. Rs. 4,000
  3. Rs. 15,000
  4. Rs. 19,000 Correct answer.

Explanation

Cheques issued but not presented have already been deducted in the cash book but not in the pass book, so the pass book balance is higher. Adding Rs. 4,000 to Rs. 15,000 gives Rs. 19,000. This is a standard reconciling item when starting from the cash book balance.

Question 49Subsidiary Books and Bank Reconciliation Statement

A cheque for Rs. 6,000 received from a customer was entered in the cash book but was not deposited in the bank at all. In the bank reconciliation statement starting from the cash book balance, this amount is:

  1. Added to the cash book balance
  2. Added to the pass book balance
  3. Not considered at all
  4. Deducted from the cash book balance Correct answer.

Explanation

The cash book has been increased by a receipt that never reached the bank, so the cash book balance is higher than the pass book balance. To reconcile, the Rs. 6,000 must be deducted from the cash book balance. This item is often called a cheque omitted to be banked.

Question 50Subsidiary Books and Bank Reconciliation Statement

Which of the following transactions is recorded in the journal proper rather than in a subsidiary book?

  1. Credit purchase of trading goods
  2. Cash received from a debtor
  3. Credit sale of goods to a customer
  4. Credit purchase of machinery from a supplier Correct answer.

Explanation

The journal proper records transactions that do not fit any of the special books, such as credit purchase of an asset like machinery. Credit sales of goods go to the sales book, credit purchases of goods to the purchases book, and cash receipts to the cash book.