Welcome to the Chapter 4 - Recording of Transactions - 2, Class 11 Accountancy NCERT Solutions page. Here, we provide detailed question answers for Chapter 4 - Recording of Transactions - 2. The page is designed to help students gain a thorough understanding of the concepts related to natural resources, their classification, and sustainable development.
Our solutions explain each answer in a simple and comprehensive way, making it easier for students to grasp key topics Recording of Transactions - 2 and excel in their exams. By going through these Recording of Transactions - 2 question answers, you can strengthen your foundation and improve your performance in Class 11 Accountancy. Whether you’re revising or preparing for tests, this chapter-wise guide will serve as an invaluable resource.
(iv) Bank and cash account in the ledger
(ii) Cash and bank transactions
(iii) Cash book
(ii) Credit nature
(ii) Cash and credit purchase
(iv) Sales return account
(ii) Cash deposited in our bank
(iii) Purchase returns account
(iii) Difference in total of debit & credit
(a) subsidiary
(b) cash
(c) purchases return
(d) journal proper
(e) cash, bank
(f) more
(g) credit
(h) bank
(i) overdraft
(j) imprest
(k) credit
(a) False
(b) True
(c) False
(d) False
(e) False
(f) True
(g) True
(h) False
(i) True
(j) True
(k) False
(l) False
Cash Book plays dual role as a book of original entry (or primary entry) as well as a ledger. It is a subsidiary book because all cash transactions are first recorded in the cash book and then from the cash book posted to various accounts in the ledger.
The Cash Book is also a ledger in the sense that it serves the purpose of a Cash A/c 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’.
The process of preparing ledger from Journal can be explained with the help of an example. Let us suppose that machinery is purchased from Mr. X, so, the journal entry will be:
Machinery A/c Dr.
To Mr. X A/c
In this example, the Machinery Account is debited and Mr. X's account is credited. The process of preparing ledger from the journal entry is as follows:
Account which is debited in the entry:
Step 1: Identify the account in the ledger that is debited, i.e., ‘Machinery Account’.
Step 2: Enter date in the debit side of the ‘Machinery Account’ in the ‘Date’ column.
Step 3: Enter the name of the account as ‘Mr. X Account’ (which is credited in the entry) in the ‘Particulars’ column in the debit side of the Machinery Account.
Step 4: Enter the page number of the journal, where the entry is recorded in the ‘J/F.’ (journal folio) column.
Step 5: Post the corresponding amount in the ‘Amount’ column, which is recorded against ‘Machinery Account’ in the journal entry.
Account which is credited in entry:
Step 1: Identify the account in the ledger that is credited, i.e., ‘Mr. X Account’.
Step 2: Enter date in the credit side of ‘Mr. X Account’ in the ‘Date’ column.
Step 3: Enter the name of the account as ‘Machinery Account’ (which is debited in the entry) in the ‘Particulars’ column in the credit side of the ‘Machinery Account’.
Step 4: Enter the page number of the journal where the entry is recorded in the ‘J.F.’ (journal folio) column.
Step 5: Post the corresponding amount in the ‘Amount’ column, which is recorded against ‘Mr. X account’ in the journal entry.
Imprest System of Petty Cash
Under this system, the petty cashier is given a definite sum,say ₹ 5,000, at the beginning of a certain period. This amount is called ‘imprest amount’.
A good Imprest System should have the following essentials:
1) The petty cashier should obtain receipts for all the payments made by him.All these receipts should be arranged date aise and numbered so that these may be checked up easily by the main cashier when he takes reimbursement of the amount spent by him.
2) The petty cashier should himself prepare proper vouchers for those expenses for which proper receipts cannot be obtained. He should get these vouchers sanctioned from a proper authority.
3) There should be an upper limit of the amount of a single payment by the petty cashier. Payment above this limit should be made only by the main cashier.
4) Petty cashiers should get the reimbursement of the amount spent by him only from the main cashier.
5) Petty Cashiers should not be entitled to receive any cash coming from outside the business.
6) Great care should be taken while fixing the amount of interest. It should be sufficient to cover the petty expenses for the month.
When cash is deposited into the bank or when cash is withdrawn from the bank for use in the office, each such transaction affects both ‘Cash Column’ as well as ‘Bank Column’ and the transaction is therefore recorded on both sides of the cash book. Such entries, the double entry of which is complete in the Cash Book itself, are called "Contra entries.
Contra Entries are those entries which take place between bank and cash. In this case when cash is deposited in the bank and when cash withdrawal for office use from the bank, both the entries are posted in Cash Book and letter ‘C’ is written in Journal Folio(Jf) column so that these entries are not posted to the ledger account further.
Special purpose books are as follows:-
1) Cash Book
2) Purchase Book
3) Purchase Return (Return Outwards) Book
4) Sales Book
5) Sales Return (Return Inwards) Book
6) Journal Proper
Petty Cash is prepared just like a simple cash book having the debit and credit sides. Amount received from the head cashier is recorded on the debit side, whereas the payments are recorded on the credit side.
Petty Cash Book is prepared to make a record of petty expenses.
Posting journal entries is the process of transferring recorded business events from the general journal to the ledger. In other words, posting is the next step in the accounting cycle after journalizing.
Subsidiary Books are maintained because it may be impossible to record each transaction into the ledger as it occurs. Subsidiary Books record the details of the transactions and therefore help the ledger to become brief. Future reference and any desired analysis becomes easy as transactions of similar nature are recorded together in subsidiary books.
Return Inwards
1) The return inwards arises when goods that are sold are returned back and hence it has to be deducted from the amount of sales.
2) The return inwards account deals with goods returned by customers.
3) It is also called Sales Return.
4) Example:- Let’s suppose a customer ‘Star Pvt Ltd.’ returned goods worth Rs 5,000 to ‘Unreal Corp.’ The journal entry to record these sales returns in the books of Unreal Corp. will be as follows;
| Return Inwards A/c | 5,000 |
| To Star Pvt. Ltd. A/c | 5,000 |
Return Outwards
1) Return outwards are goods returned by a customer to the seller.
2) They are also called Purchase returns.
3) Outward returns reduce the total accounts payable for a business.
4) Example :- Let’s suppose that a company “Unreal Pvt Ltd.” returned goods worth 10,000 to its supplier ‘Star Pvt Ltd.’ The journal entry to record these returns in the books of Unreal Pvt Ltd. will be as follows;
| Star Pvt. Ltd. A/c | 10,000 |
| To Return Outwards A/c | 10,000 |
In accounting, ledger folio is often abbreviated as Ledger Folio. You may have seen the notation on the manual books or on reports printed out from certain small business accounting software packages. To offer a complete meaning it is necessary to define the journals and ledgers and explain how transactions flow from the former to the latter.
Ledger folio or L.F. is the page number of the ledger account where the posting has been made from the journal. This page number of the ledger is recorded in the journal.
Trade Discount
1) This discount is allowed by wholesaler or manufacturer to the retailer at a fixed percentage on the listed price of goods.
2) It is allowed when goods are purchased in bulk, i.e., large quantity.
3) It is not recorded separately in the books of accounts.
4) For example, if a trader sells goods of the list price of ₹1,00,000 at 20% trade discount for cash, the entry will be:-
| Cash A/c Dr. | 80,000 | |
| To Sales A/c | 80,000 |
Cash Discount
1) Cash Discount is allowed if the customer makes the payment immediately or within a fixed period.
2) It is allowed when payment is made on or before a specified date.
3) It is recorded separately in the books of accounts.
4) For example, if a trader sells goods of the list price of ₹20,000 at 10% trade discount and 2% cash discount, the net amount will be calculated as under: ₹
List Price 20,000
Less: Trade Discount @ 10%. 2,000
18,000
Less:. Cash Discount @ 2%. 18,000 × 2/100 360
17,640
It means that ₹17,640 will be paid if the payment is made in cash.
It becomes very much difficult for a small business to record all its transactions in one book only, i.e., the journal. But as the business expands and the number of transactions becomes large, it may become cumbersome to journalize each and every transaction.
For quick, efficient and accurate recording of business transactions, journals are required to be sub-divided into special journals. Many of the business transactions are repetitive in nature.
They can be easily recorded in special journals, each meant for recording all the transactions of a similar nature, e.g., all cash transactions may be recorded in one book, all credit sales transactions in another book and all credit purchase transactions in yet another book and so on.
These special journals are also called daybook or subsidiary books. Special journals prove economical and make division of labour possible in accounting work. The above mentioned are the only reasons which emphasis for drawing the special purpose books.
Cash Book - This book is used to record all transactions relating to cash receipts and cash payments. This book enables a businessman to know the balance of cash in hand and at bank at any point of time. It also gives information about the daily receipts, payments and the closing cash balance at the end of each day. Hence, this is a very popular book and is maintained by all the organisations - big or small.
Types of Cash Book
1) Single Column Cash Book or One Column Cash Book
2) Double Column Cash Book having
a. Cash and Discount Columns
b. Bank and Discount Columns
c. Cash and Bank Columns
3) Triple Column Cash Book
4) Petty Cash Book
Contra Entry : when cash is deposited into the bank or when cash is withdrawn from the bank for use in the office, each such transaction affects both ‘Cash Column’ as well as ‘Bank Column’ and the transaction is therefore recorded on both sides of the cash book. Such entries, the double entry of which is complete in the Cash Book itself, are called “Contra Entries”.
Some transactions that lead to contra entry are given below.
1. Opening a bank account
2. Depositing cash into bank
3. Withdrawal from bank
Petty Cash Book: In every business, of whatever size, a large number of small payments such as for postage, stationery, bus fare, taxi fare, cartage etc., have to be made.These payments are generally repetitive in nature. If all these payments are made by the cashier and are recorded in the main cash book, the cashier will be overburdened with the work and the cash book will also become very bulky. To avoid this, it is usual to appoint an employee as “Petty Cashier”. He is entrusted with the task of making small payments, say, below ₹500 and records them in a separate book, called Petty Cash Book.
Advantages of Petty Cash Book
1) Saving of time and efforts of Chief Cashier
2) Easiness in Posting
3) Easiness in preparing the Cash Book
4) Control on Petty Expenses
5) Lesser chances of fraud
6) Simple Method
It may be impossible to record each transaction into the ledger as it occurs. Subsidiary books record the details of the transactions and therefore, helps the ledger to become brief. As similar transactions are recorded together in the same book, future reference to any of them becomes easy.
Because of subdivision the books cannot be bulky and hence there will be no difficulty in handling them. Accounting work is divided amongst a large number of employees. So work is done nicely and promptly and no work is left in arrear.
Balancing of Account:- Balancing an account means totalling the two sides and striking the difference. The difference is written in the column with shorter balance and is carried forward as a balance in the next accounting period.
The difference between the sum of the two sides of an account is called the balance. This is the most important part of an account as it shows the value or position of asset, liability, capital, income or expenses of which the account is a record. If the total of the debit side exceeds the total of the credit side then this would be represented by a debit balance and the opposite is true for a credit balance.