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Recording of Transactions - II Test 8

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Recording of Transactions - II Test 8
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  • Question 1
    1 / -0
    Note issued by seller on receipt of defective goods from customer __________.
    Solution
    A credit note is prepared on receipt of defective goods from customer by the seller. A credit note is a letter sent by the supplier to the customer notifying the customer that he or she has been credited a certain amount due to an error in the original invoice or other reasons. It is also called as "credit memo".
  • Question 2
    1 / -0
    Entry which is to be recorded on the receipt side as well as payment side of cash book _____________.
    Solution
    When there is a transaction that relates to both cash and bank, this will be written  on one side of bank column and on other side of cash column. Such transactions are known as "Contra entries". In case cash is withdrawn from bank for office use, its is entered on the credit side of bank column and also in the debit side of cash column of the cash book. In case cash is deposited in the bank, the amount is recorded on the debit side of bank column and on the credit side of cash column of the cash book. The letter "C" is written in the LF column on both sides against these entries. These entries are not to be posted into ledger.
  • Question 3
    1 / -0
    Direct deposit made by customer into your bank is recorded on the ______ side of the cash book.
    Solution
    Cash book is a book in which all transaction relating to cash receipts and cash payments are recorded. It starts with the cash or bank balances at the beginning of the period. Generally, it is made on monthly basis. This is a very popular book and is maintained in all organisations, big or small, profit or not-for-profit. It serves the purpose of both journal as well as the ledger account. It is also called as the book of original entry. The left side of the cash book shows the receipts of the cash whereas the right side of the cash book shows all the payments made in cash. The accounts appearing on the debit side for the cash book are credited in the respective ledger accounts because cash has been received in respect of them. Direct deposit made by customer into your bank is recorded on the receipts side of the cash book.
  • Question 4
    1 / -0
    Entry for bad debts is recorded in the ______.
    Solution
    A book maintained to record transactions, which do not find place in special journals, is known as Journal Proper or Journal residual. 
    Bad debts are accounts receivable that a company does not expect to collect and has written off to income statement as an expense, Bad debts are also called irrecoverable debts. Entry for bad debts is recorded in the Journal Proper. 
    The following transactions are recorded in the journal:
    1. Opening entries
    2. Adjustment entries
    3. Rectification entries
    4. Transfer entries
    5. Other entries
  • Question 5
    1 / -0
    Additional cash introduced in business is recorded in ______.
    Solution
    Cash book is a book in which all transactions relating to cash receipts and cash payments are recorded. It starts with the cash or bank balances at the beginning of the period. 
    When a cash book is maintained, transactions of cash are not recorded in the journal, and no separate account for cash or bank is required in the ledger. Any additional cash introduced in the business  is also recorded in the cash book.
  • Question 6
    1 / -0
    Goods returned to suppliers should be accompanied by __________.
    Solution
    A Debit note is a document evidencing a debit to be raised against a party for reasons other than the sale on credit. On finding that goods supplied are not as per the terms of the order placed, the defective goods are returned to the supplier of the goods and a note is prepared to debit the supplier; or when an additional sum is recoverable from a customer such a note is prepared to debit the customer with the additional dues. 
    In these two situations the note raised is called as a debit note.
  • Question 7
    1 / -0
    When total of Debit side of an account is more than total of Credit side of an account it is ____________.
    Solution
    Balancing of an account means ascertaining the net effect of the transactions, i.e. the difference between the debit side and credit side of the ledger account. 
    When the total of debit side of an account is more than the total of the credit side of that account, then the balancing figure is termed as debit balance. 
  • Question 8
    1 / -0
    Closing balance of cash book is _____________ balance.
    Solution
    Total of the debit side of the cash book or cash A/c always exceeds its credit side because payments of a business cannot exceed the receipts amount. So, the cash book shows debit balance. When payments are exactly equal to the receipt of the business, it will show zero balance, but it can never show the credit balance. Thus, the cash book will always show debit balance or zero balance.
  • Question 9
    1 / -0
    Capital Account shows _____________.
    Solution
    When credit side of the ledger account exceeds the debit side, then the balancing figure is termed as credit balance. All liabilities, income and gains and capital shows credit balance.
  • Question 10
    1 / -0
    Purchase Returns Account shows ______________.
    Solution
    A purchase return account shows the credit balance. Purchase return represents the amount of goods returned to the supplier. 
    When goods are bought from a supplier, the purchases A/c will be debited and when the goods are returned, the purchase return A/c will be credited as stock is reduced. 
    Thus, purchase return A/c shows the credit balance.
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