Bank Reconciliation Statement Test - 1

All cash transactions whether purchase or sale are recorded in cash book.

Cash book records transactions of only cash nature. Receipts are recorded on debit side and payments are recorded on credit side.

It is a account which is a part of double entry system. The total of purchases account is shown in the Trading account and transferred to trial balance.

Overdarft is a short term liability and the client is permitted to overdraw from his account up to agreed limit as per his requirement, and thus overdraft will appear as the credit balance of bank column in the cash book.

Double column cash book can be cash and discount column, bank and discount column or cash and bank column. It shows two columns in the cash book on both the side. i.e. debit and credit.

The balance between the total of debit side and credit side in an account is called "balance".Balancing ascertains the net position of the ledger account.

As the owner invests personal cah in the business, cash which comes on asset side increases and capital i.e. equity also increases as owner's investment in the business increase.

Payment of bank loan will reduce the cash/bank balance, i.e. asset side and also our liability of bank loan will reduce, thus assets : decrease, liablities : decrease.

cash book is a subsidairy book as it is prepared to record entries related to cash transactions. Those transactions are not recorded in the journal book that is why cash book is called subsidiary book.

Trade discount is not recorded in the books, only net amount  i.e. (list price- trade discount) is recorded. and cash discount is allowed when discount is allowed during receiving/ paying cash. and separate discount account is opened in the books of accounts for recording cash discount.