Bank Reconciliation Statement Test - 4

As the bill receivable is the amount to be recevied by the seller from the buyer so it is prepared by seller which in turn is accepted by the buyer as acknowledgment of the debt and sent to the seller to collect on due date.

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

In this an amount is fixed and advanced to the petty cashier in order to meet petty expenses.this is called imprest or float system.

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.

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

In the purchase book only purchase of goods on credit is recorded and thus cash purchases of goods and purchase of long term assets will not be recorded in the purchase book.

Only purchase of goods i.e in which trading concern deals is recorded in purchase journal. and asset purchased for cash or credit will be recorded in the journal proper.

Contra means the other side. When both the debit and credit aspects of a transaction are recorded simultaneously in the same book but in dfferent columns, each entry on the debit side and on the credit side is called the contra entry.

As the owner invests personal cash 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.

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.

When Assets increases , we debit the said asset account.

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.

Only cash transactions are recorded in the cash book. Non-cash aspect of transaction is not recorerded in the cash book, i.e. credit trasnaction it is recorded in other books

As different subsidiary books are maitained it becomes conveninet in handling and maintaining the books. and thus the above option is not the advantage of subsidiary book.

The debit note issued to the supplier indicates the supplier that his account has been debited in the books of the firm., as his account balance is reducing.

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.

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.

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.

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.

Since the cheques which are not presented to the bank will not reduce our bank balance but we have already subtracted those cheques from cash book bank column so it will show lesser balance so we will have to add the cheques issued but not presented in order to increase pass book balance to cash book bank balance