Chapter # 5a4accounting.weebly.com/uploads/7/1/2/8/7128209/chapter...Cash book are of three types: Simple Cash Book: Only actual cash transactions are recorded in this book. It is

Chapter # 5 Three Column Cash Book

Principles of Accounting – XI

Sameer Hussain

www.a4accounting.weebly.com

Three Column Cash Book

Chapter # 5

Sameer Hussain www.a4accounting.weebly.com Page 78

Chapter contents

Cash and bank. Discounts. Cash book. Three column cash book. Opening balances. Contra entry. Dishonour of a cheque. Treatment of transactions in three

column cash book. Illustrations. Practice question. Multiple Choice Questions (MCQs).


Chapter # 5

Sameer Hussain Page 79


Chapter # 5

THREE COLUMN CASH BOOK CASH AND BANK

Cash: Involves money kept in the office.

Bank: The rest of money not in cash account. Kept in the current account of the bank (not in fixed deposit account).

Bank Overdraft: A loan made to a customer with a cheque account at a bank in which the account is allowed to go into debit, usually up to a specified limit.

DISCOUNTS

There are two types of discounts recorded in cash book:

Sales Discount:

A reduction in the sales-invoice amount that the customer can take if the payment is made within a specified period of time. If the customer pays after the discount period, the entire amount of the invoice is due in a longer period of time. A sales discount is really disguised interest.

Purchase Discount: The amount that a purchaser can deduct from the invoice cost of items bought on credit because of payment within a certain time period.

CASH BOOK

Cash book are of three types:

Simple Cash Book:

Only actual cash transactions are recorded in this book. It is exactly like cash account. On the debit side of cash book we record cash coming in or cash received so it is also known as Receipts side. On the credit side of cash book we record cash going out or cash paid so it is also known as payment side.

Double Columnar Cash Book:

There are two amount columns – cash and discount in this cash book. Discount column on the debit side is called discount allowed and discount column on the credit side is called discount received. Discount column should never be balanced as discount column of debit side is an expense and discount column on credit side is an income. Discount column will never have an opening or closing balance.

Triple Columnar

Cash Book: There are three amount columns: (1) Cash (2) Bank (3) Discount All cash and bank transactions are recorded in this book

SINGLE COLUMN CASH BOOK

Format of Single Column Cash Book: Name of Business

Single Column Cash Book Date Particular PR Cash Date Particular PR Cash

Receipt Side Payment Side


Chapter # 5

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Sameer Hussain

ILLUSTRATION # 1:

(Single Column Cash Book) Following are the selected transactions of DL Traders for the month of November 2011: November 01: Cash in hand Rs.20,000. November 06: Merchandise purchased for cash Rs.8,000. November 15: Cash collected from customer Rs.13,000. November 20: Cash paid to supplier Rs.4,000. November 21: Cash sales Rs.7,000. November 22: Purchased equipment Rs.3,000. November 30: Paid salaries to employees Rs.10,000. REQUIRED Record the above transactions in single column cash book.

Solution # 1: DL TRADERS

SINGLE COLUMN CASH BOOK FOR THE MONTH OF NOVEMBER 2011

Date Particular P/R Cash Date Particular P/R Cash

Nov. 1 Balance 20,000 Nov. 6 Purchases 8,000 Nov. 15 Accounts receivable 13,000 Nov. 20 Accounts payable 4,000 Nov. 21 Sales 7,000 Nov. 22 Equipment 3,000 Nov. 30 Salaries expense 10,000 25,000 Nov. 30 Balance c/d 15,000 40,000 40,000

Dec. 1 Balance b/d 15,000

Explanation of Solution # 1: November 6: Goods purchased reduces the cash and recorded on the payment side. November 15: Cash received from customer increases the cash, recorded on the receipt side. November 20: Payment to supplier reduces the cash, recorded on payment side. November 21: Sales increases the cash, recorded on receipt side. November 22: Purchase of fixed assets reduces the cash, recorded on payment side. November 30: Payment to employees reduces cash, recorded on payment side. Total receipts of cash during the month was Rs.40,000 and total disbursements was Rs.25,000. The ending balance of cash was Rs.15,000 (40,000 – 25,000 = 15,000).

DOUBLE COLUMN CASH BOOK

Format of Double Column Cash Book: Name of Business

Double Column Cash Book

Date Particular PR Sales

Discount Cash Date Particular PR

Purchase Discount

Cash



Chapter # 5



ILLUSTRATION # 2:

(Double Column Cash Book) Following are the selected transactions of Insta Corporation for the month of May 2000: May 01: Cash in hand Rs.3,000. May 10: Cash collected from customer Rs.800 in full settlement of his account of Rs.850. May 14: Cash purchases Rs.500. May 20: Cash paid to supplier Rs.400 after discount of Rs.20. May 30: Paid rent Rs.200 and withdrew cash for personal use Rs.100. REQUIRED Record the above transactions in double column cash book.

Solution # 2: INSTA CORPORATION

DOUBLE COLUMN CASH BOOK FOR THE MONTH OF MAY 2000


Discount Cash Date Particulars PR

Purchase Discount

Cash

May 1 Balance 3,000 May 14 Purchases 500 May 10 A/R 50 800 May 20 A/P 20 400 May 30 Rent 200 May 30 Drawings 100

1,200 May 31 Balance c/d 2,600 50 3,800 20 3,800

June 1 Balance b.d 2,600

Explanation of Solution # 2: On May 10, cash received Rs.800 and allowed discount Rs.50. cash collection increases cash, recorded on receipt side as Rs.800 and Rs.50 on discount column. On May 20, payment was made Rs.400 and availed a discount of Rs.20. Reduction in cash is recorded on payment side Rs.400 and Rs.20 on discount column.

THREE COLUMN CASH BOOK Cash book is maintained on monthly basis in the organization for the recording of transactions related to cash receipts and cash payments. Credit transactions are not recorded in the cash book. There are two sides of cash book. Left side is used for receipts and right side is used for payments and both sides are maintained simultaneously.

OPENING BALANCES Discount No balance at any time.

Cash: Always a debit balance.

Bank: Bank balance – Debit balance. Bank overdraft – Credit balance.


Chapter # 5


Sameer Hussain

Cash Book

Receipts Payments Sales Discount Cash Bank Purchase

Discount Cash Bank

CONTRA ENTRY It is an entry which is recorded on both sides of cash book (receipt and payment). Cash deposited into bank from office or cash withdrew from bank for office use is the only contra entry which is recorded on both sides, because this entry affects the both sides of cash book.

Contra Entry

Cash/cheque deposited into bank, OR Withdrew cash from bank for office use

Receipts Payments

DISHONOUR OF A CHEQUE (a) When a cheque is dishonoured, dishonour entry should be recorded on the opposite side. (b) On dishonour the discount related to the cheque should also be cancelled.

Format of Three Column Cash Book: Name of Business



Discount Cash Bank Date Particular PR

Purchase Discount

Cash Bank


TREATMENT OF SOME TRANSACTIONS ON THREE COLUMN CASH

BOOK

Dishonour Cheque: When customer’s cheque returned by the bank, it is recorded on the payment side (bank column).

Cheque Received but

not Deposited into Bank:

It is recorded on the receipt side (cash column) because it is treated as cash until it is deposited into bank. It increases the cash on hand.

Overdraft Balance of

Bank Account: Overdraft balance of bank account is the negative balance of bank. It is recorded on the payment side (bank column) of cash book as liability.

Cheque Received in Full Settlement &

Deposited into Bank:

When cheque received in full settlement of customer’s account, it shows the discount allowed to customer. The amount of cheque received is recorded on receipt side (bank column) and amount of discount is recorded on sales discount column.


Chapter # 5



Issue of Cheque in Full Settlement:

When cheque is issued in full settlement, it indicates the discount received from supplier. The amount of cheque issued is recorded on payment side (bank column) and discount amount is recorded on purchase discount column.

Depositing Cash/Cheque into

Bank:

It is treated as contra entry and recorded on both sides (receipt and payment) of cash book. It increases the bank account and reduces the cash on hand. It is recorded on payment side (cash column) and receipt side (bank column) of cash book.

Withdrew Cash from Bank for Office Use:

It is also contra entry and recorded on both sides of cash book. It reduces the bank account and increases the cash on hand. It is recorded on payment side (bank column) and receipt side (cash column) of cash book.

Payment of Expenses or Purchase of Goods:

Payments reduce the cash on hand or bank account. If the payment is made for cash, it is recorded on payment side (cash column) but if the payment is made through bank, it is recorded on payment side (bank column) of cash book.

Cash Sales: Sales increases the cash on hand. It is recorded on the receipt side (cash column).

Cash Short: Cash short reduces the cash balance. It is recorded on payment side (cash column) of cash book.

Cash Over: Cash over increases the cash balance. It is recorded on receipt side (cash column) of cash book.

Drawings: Cash withdrawal for personal use is recorded on payment side (cash column) but withdrawal from bank for personal use is recorded on payment side (bank column) of cash book.

Direct Deposit by

Customer: It increases the bank account. It is recorded on the receipt side (bank column) of the cash book.

Online Payment: It shows the payment to supplier through bank directly. It reduces bank account and recorded on payment side (bank column).

Online Receipt: Receives from customer online through internet which results increase in bank account. It is recorded on receipt side (bank column).

Part Payment in Cash

and Part Payment Through Bank:

When payment is made partly though bank and partly in cash, it is recorded on payment side (cash column) with the amount of cash paid and payment side (bank column) with the amount of cheque issued.

Cash and Cheque Received from

Customer:

When cash and cheque are received from customer and cheque is deposited into bank on the same day, it is recorded on the receipt side (cash column) with the amount of cash received and receipt side (bank column) with the amount of cheque deposited into bank. But if the cheque is not deposited into bank, the whole amount of cash and cheque is recorded on the receipt side (cash column) of the cash book.


Chapter # 5


Sameer Hussain

Loan from Bank: Bank granted loan to organization. It increases the bank account because practically bank grants loan into bank account. It is recorded on receipt side (bank column).

Overdraft Facility Provided by Bank:

Bank offers to the organization for the overdraft facility. It does not affects the cash on hand or bank account until the facility is used by the organization. It is not recorded in cash book.

Payment by Owner

from His Private Source:

When the owner paid amount for any expense or any asset for the business purpose, it does not affects the business cash, therefore, it will not be recorded in cash book.

Transfer from One Bank Account to

Another Account:

It is possible that there are more than one bank accounts in organization. Transfer from one account to another account is a contra entry and is recorded on both sides of cash book. It is record the payment side (bank column from which cash is transferring) and on the receipts side (bank column in which cash is transferring).

ILLUSTRATION # 3: 1989 Regular & Private – BIEK

(Three Column Cash Book with Opening Balances) On March 1, 1989 Khalid Brothers had cash on hand, Rs.5,000 and cash in bank Rs.2,000 during the month they completed the following transactions: March 4 Cash sales Rs.6,000. 5 Deposited cash into bank Rs.7,000. 9 Cash purchases Rs.3,000. 14 Paid wages in cash Rs.500. 17 Received cash Rs.540 from Hamid Sons in full settlement of their account of Rs.600. 20 Received cheque for Rs.1,000 from Mr. Zahid and deposited the same into bank. 22 Mr. Khalid withdrew from bank Rs.2,000 for personal use. 26 Purchased office supplies for cash Rs.100. 28 Issued a cheque payable to Mr. Saif for Rs.800 in full settlement of his account of Rs.840. REQUIRED (i) Enter the opening balances and record the above transactions in a three column cash book. (ii) Balance the cash book on March 31, 1989 and show the opening balance on April 1, 1989.

Solution # 3: GENERAL LEDGER Discount Expense

31.March.1989 CB Rs.60

Discount Income 31.March.1989 CB Rs.40


Chapter # 5



KHALID BROTHERS THREE COLUMN CASH BOOK

FOR THE MONTH OF MARCH 1989

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Chapter # 5


Sameer Hussain

Explanation of Solution # 3: March 4: Cash sales increases the cash in the business. It is recorded on the receipt

side (cash column) of cash book. March 5: Depositing cash into bank is a contra entry. Bank account is increasing

while cash is decreasing. Increase in bank recorded on the receipt side (bank column) and decrease in cash recorded on the payment side (cash column) of cash book.

March 9: Cash purchases reduces cash which is recorded on the payment side (cash column) of cash book.

March 14: Payment of wages reduces cash and recorded on the payment side (cash column) of cash book.

March 17: Receiving cash from customer Rs.540 and allowing him discount of Rs.60 in full settlement of Rs.600. It increases cash which is recorded on the receipt side (cash column) as Rs.540 and Rs.60 is recorded on the sales discount column.

March 20: Receiving cheque from customer and depositing the same into bank increases the bank account. It is recorded on the receipt side (bank column) of cash book.

March 22: Drawings from bank reduces the bank account which is recorded on payment side (bank column) of cash book.

March 26: Payment of supplies reduces the cash which is recorded on the payment side (cash column) of cash book.

March 28: Issue of cheque of Rs.800 and received a discount of Rs.40 in full settlement of Rs.840. Payment reduces the bank account with Rs.800 recorded on payment side (bank column) and Rs.40 is recorded on purchase discount column.

Total receipts of cash Rs.11,540 and total payments of cash Rs.10,600. The balance of cash at the end of month Rs.940 (11,540 – 10,600 = 940). Total deposited into bank Rs.10,000 and total payments through bank Rs.2,800. The ending of bank balance Rs.7,200 (10,000 – 2,800 = 7,200).


(Three Column Cash Book – Investing Cash) The following are cash transactions relating to the business of Kamran Enterprises for April 2009: April: 5. Mr. Kamran invested cash Rs.50,000 in the business. 11. Received cheque for Rs.19,500 from a customer and allowed discount of Rs.500. 16. Deposited customer’s cheque in the bank. 20. Issued a cheque for Rs.9,800 to a supplier in full settlement of the accounts payable of

Rs.10,000. 25. Withdrew cash Rs.5,000 from bank for office use. 30. Paid salaries for the month Rs.6,000 in cash. REQUIRED

a) Record the above transactions in a three column Cash Book. b) Balance the Cash Book on April 30 and bring down the balances on May 1.


Chapter # 5



Solution # 4: KAMRAN ENTERPRISES

THREE COLUMN CASH BOOK FOR THE MONTH OF APRIL 2009

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Chapter # 5


Sameer Hussain

Explanation of Solution # 4: April 5: Invested cash in business by owner increases the cash in the business and

increase in cash is recorded on receipt side (cash column) of cash book. April 11: Received cheque from customer Rs.19,500 and allowed discount Rs.500.

Cheque received but not deposited into bank is treated as cash on hand until it is deposited into bank. Therefore, Rs.19,500 is recorded on the receipt side (cash column) and Rs.500 on sales discount column.

April 16: The cheque received on April 11 was deposited into bank. When cheque was received, it was recorded on the cash column because it was treated as cash. Now this cash was deposited into bank and when cash deposited into bank, it is recorded on the both sides (receipt and payment) of cash book because it is contra entry. It increases bank account and reduces cash on hand. Increase in bank recorded on receipt side (bank column) and decrease in cash is recorded on payment side (cash column).

April 20: Issue of cheque of Rs.9,800 and received a discount of Rs.200 in full settlement of Rs.10,000. Payment reduces the bank account with Rs.9,800 recorded on payment side (bank column) and Rs.200 is recorded on purchase discount column.

April 25: Withdrawal from bank for office use is recorded on both sides of cash book. It reduces the bank account and increases the cash on hand. Increase in cash is recorded on receipt side (cash column) and decrease in bank is recorded on payment side (bank column) of cash book.

April 30: Payment of salaries reduces cash and recorded on the payment side (cash column) of cash book.

Total receipts of cash Rs.74,500 and total payments of cash Rs.25,500. The balance of cash at the end of month Rs.49,000 (74,500 – 25,500 = 49,000). Total deposited into bank Rs.19,500 and total payments through bank Rs.14,800. The ending of bank balance Rs.4,700 (19,500 – 14,800 = 4,700).

ILLUSTRATION # 5: 2014 Private – BIEK

(Three Column Cash Book – Dishonoured Cheque) M/S. Jawaid & Co. uses three column cash book in their business. On March 1, 2014, they had cash in hand Rs.50,000 and cash at bank Rs.90,000. Following transactions were completed by them during March: March 05: Sold merchandise for cash Rs.36,000. March 10: Received a cheque from Younus for Rs.24,500 in full settlement of Rs.25,000.

The cheque was deposited into the bank on the same day. March 15: Paid cash to Muneer Rs.22,700 iin full settlement of his account of Rs.23,000. March 17: The cheque of Younus was dishonoured by the bank. March 26: Withdrew from bank Rs.2,000 to pay residential flat’s rent and Rs.6,000 for

office rent. REQUIRED Prepare a three column cash book. Balance it on March 31 and bringing down the balances as on April 1, 2014.


Chapter # 5



Solution # 5: M/S. JAWAID & CO.

THREE COLUMN CASH BOOK FOR THE MONTH OF MARCH 2014

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Chapter # 5


Sameer Hussain

Explanation of Solution # 5: March 5: Cash sales increases the cash in the business. It is recorded on the receipt

side (cash column) of cash book. March 10: Receiving cheque from customer and depositing the same into bank

increases the bank account. It is recorded on the receipt side (bank column) of cash book as Rs.24,500 and allowed discount is recorded on sales discount column as Rs.500.

March 15: Cash paid to supplier after discount reduces the cash. Decrease in cash is recorded on payment side (cash column) as Rs.22,700 and Rs.300 as purchase discount.

March 17: Customer’s cheque returned by the bank. When cheque was deposited into bank, it was recorded on the receipt side (bank column) as increase in bank account but actually cheque was not deposited into bank account by the bank due to dishonoured cheque. Dishonoured cheque reduces the bank account and recorded on payment side (bank column) of cash book. The discount was allowed to customer Rs.500 when the cheque was received. When the cheque was returned unpaid by the bank, the discount will be lost by customer. Rs.500 discount will be deducted from sales discount column (receipt side).

March 26: Cash withdrawal from bank for personal use and payment of office rent reduces the bank account which is recorded on payment side (bank column) of cash book.

Total receipts of cash Rs.86,000 and total payments of cash Rs.22,700. The balance of cash at the end of month Rs.63,300 (86,000 – 22,700 = 63,300). Total deposited into bank Rs.114,500 and total payments through bank Rs.32,500. The ending of bank balance Rs.82,000. (114,500 – 32,500 = 82,000).

ILLUSTRATION # 6: 2013 Private – BIEK

(Three Column Cash Book with Overdraft Balance) Mr. Shehzad uses three – column cash book. On April 1, 2012, he had cash in hand Rs.40,000 and balance at bank Rs.50,000 (bank overdraft). During the month he completed the following transactions: April 01: Cash sales Rs.60,000. April 03: Received a cheque for Rs.15,000 from a customer Raja, deposit into bank in full

settlement of his account of Rs.16,000. April 05: Mr. Ahsan settled his account of Rs.18,000 after a discount of Rs.1,000 through

cheque. April 09: Deposited Mr. Ahsan’s cheque into bank. April 18: Paid salaries by cheque Rs.11,000. April 25: Drew cash for personal use Rs.1,000. April 30: Drew from bank for office use Rs.4,000. REQUIRED Record the above transactions in three column cash book.


Chapter # 5



Solution # 6: MR. SHEHZAD

THREE COLUMN CASH BOOK FOR THE MONTH OF APRIL 2012

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Chapter # 5


Sameer Hussain

Explanation of Solution # 6: Bank showed overdraft balance of Rs.50,000. Overdraft balance is the negative balance of bank account. It is recorded on the receipt side (bank column) as negative balance. April 1: Cash sales increases the cash in the business. It is recorded on the receipt

side (cash column) of cash book. April 3: Receiving cheque from customer and depositing the same into bank

increases the bank account. It is recorded on the receipt side (bank column) of cash book as Rs.15,000 and allowed discount is recorded on sales discount column as Rs.1,000.

April 5: Received cheque from customer Rs.17,000 and allowed discount Rs.1,000. Cheque received but not deposited into bank is treated as cash on hand until it is deposited into bank. Therefore, Rs.17,000 is recorded on the receipt side (cash column) and Rs.1,000 on sales discount column.

April 9: The cheque received on April 5 was deposited into bank. When cheque was received, it was recorded on the cash column because it was treated as cash. Now this cash was deposited into bank and when cash deposited into bank, it is recorded on the both sides (receipt and payment) of cash book because it is contra entry. It increases bank account and reduces cash on hand. Increase in bank recorded on receipt side (bank column) and decrease in cash is recorded on payment side (cash column).

April 18: Payment of salaries through cheque reduces bank account and recorded on the payment side (bank column) of cash book.

April 25: Cash withdrawal for personal use reduces the cash on hand which is recorded on payment side (cash column) of cash book.

April 30: Withdrawal from bank for office use is recorded on both sides of cash book. It reduces the bank account and increases the cash on hand. Increase in cash is recorded on receipt side (cash column) and decrease in bank is recorded on payment side (bank column) of cash book.

Total receipts of cash Rs.121,000 and total payments of cash Rs.18,000. The balance of cash at the end of month Rs.103,000 (121,000 – 18,000 = 103,000). Total deposited into bank Rs.32,000; overdraft balance of bank Rs.50,000 and total payments through bank Rs.15,000. The ending of bank balance Rs.33,000 overdraft (32,000 – 50,000 – 15,000 = 33,000). The ending balance of bank account (overdraft) is recorded on payment side.

ILLUSTRATION # 7:

(Three Column Cash Book – Multiple Bank Accounts) On June 1, 2008, Dot Net Corporation had cash in hand Rs.2,000 and cash at bank (ABL) Rs.3,000. Following are the selected transactions of for the month of June 2008: June 04: Cash sales Rs.1,000. June 10: Cheque received from customer Rs.1,000 and deposited to ABL account. June 12: Cash deposited into new bank account in UBL Rs.2,000. June 20: Cheque issued to supplier Rs.1,000 through the cheque book of UBL. June 25: Transfer Rs.2,000 from ABL to UBL account. REQUIRED Record the above transactions in three column cash book.


Chapter # 5



Solution # 7: DOT NET CORPORATION

THREE COLUMN CASH BOOK FOR THE MONTH OF JUNE 2008

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Chapter # 5


Sameer Hussain

Explanation of Solution # 7: June 04: Cash sales increases the cash in the business. It is recorded on the receipt

side (cash column) of cash book. June 10: Receiving cheque from customer and depositing the same into bank

increases the bank account. It is recorded on the receipt side (ABL bank column) of cash book because it was deposited into ABL account.

June 12: Depositing cash into bank is a contra entry. Cash was deposited into UBL account. Bank account is increasing while cash is decreasing. Increase in bank recorded on the receipt side (UBL bank column) and decrease in cash recorded on the payment side (cash column) of cash book.

June 20: Payment was made to supplier through UBL account. Payment reduces the bank account, recorded on payment side (UBL bank column).

June 25: Transfer from ABL to UBL account is a contra entry. UBL account is increasing while ABL account is decreasing. Increase in UBL account is recorded on receipt side (UBL bank column) and decrease in ABL account is recorded on payment side (ABL bank column).

Total receipts of cash Rs.3,000 and total payments of cash Rs.2,000. The balance of cash at the end of month Rs.1,000. Total deposited into ABL account Rs.4,000 and total payments through bank Rs.1,000. The ending of balance ABL account Rs.3,000. Total deposited into UBL account Rs.3,000 and total payments through bank Rs.1,000. The ending of balance UBL account Rs.2,000.


(Three Column Cash Book – Cash Short) Waheed, a sole trader, uses a three column cash book. On 1 May 1990 he had these balances cash on hand Rs.42,000 and cash in bank Rs.75,000. During the month of May he completed the following transactions. May: 02: Received from Babar and Co. a cheque for Rs.8,450 in full settlement of their account of

Rs.8,500. 04: Purchased merchandise for Rs.13,000 and issued a cheque for the amount. 06: Deposited into bank the cheque received from Babar and Co. 08: Withdrew cash from bank for office use Rs.2,000. 10: Sold merchandise for cash Rs.37,000. 13: Paid to Qazi and Co. by cheque Rs.6,570 in full settlement of their account of Rs.6,600. 17: Sold merchandise for cash Rs.25,000. 20: Deposited into bank cash Rs.25,000. 23: Waheed withdrew from the business cash Rs.1,000 for his personal use. 25: Paid for salaries expense by cheque Rs.18,000. 28: Paid for rent expense by cheque Rs.4,000 and wages expense in cash Rs.2,000. 31: Cash on hand was short by Rs.20. REQUIRED

a) Enter the opening balances and record the above transactions in the Cash Book. b) Balance the cash book on May 31, 1990 closes it and brings down the cash and bank

balances on June 1, 1990. c) Set up Sales Discount account and Purchase Discount account, each in T- account form,

and post the totals of the discount columns from the Cash Book to these accounts, giving posting reference. (In the Chart of accounts of the firm, sales discount bear No. 5001 and the purchase discount account No. 4009).


Chapter # 5



Solution # 8: WAHEED

THREE COLUMN CASH BOOK FOR THE MONTH OF MAY 1990

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Chapter # 5


Sameer Hussain

GENERAL LEDGER Sales Discount (5001)

31.May.1990 CB Rs.50

Purchase Discount (4009)

31.May.1990 CB Rs.30

Explanation of Solution # 8: May 02: Received cheque from customer Rs.8,450 and allowed discount Rs.50.

Cheque received but not deposited into bank is treated as cash on hand until it is deposited into bank. Therefore, Rs.8,450 is recorded on the receipt side (cash column) and Rs.50 on sales discount column.

May 04: Cheque issued for purchase of goods reduces the cash from bank. It is recorded on the payment side (bank column).

May 06: Depositing cheque into bank is recorded on both sides. It is recorded on receipt side (bank column) and payment side (cash column).

May 08: Withdrawal from bank for office use is also recorded on both sides. It is recorded on payment side (bank column) and receipt side (cash column).

May 10: Cash sales increases cash, recorded on receipt side (cash column). May 13: Issue of cheque of Rs.6,570 and received a discount of Rs.30 in full

settlement of Rs.6,600. Payment reduces the bank account with Rs.6,570 recorded on payment side (bank column) and Rs.30 is recorded on purchase discount column.

May 17: Cash sales increases cash, recorded on receipt side (cash column). May 20: Depositing cash into bank is recorded on both sides. It is recorded on

receipt side (bank column) and payment side (cash column). May 23: Cash withdrawal reduces cash on hand. It is recorded on payment side

(cash column) of cash book. May 25: Payment of salaries by cheque reduces bank account. It is recorded on

payment side (bank column). May 28: Payment of rent by cheque reduces bank account, recorded on payment

side (bank column) and payment of wages in cash reduces cash on hand, recorded on payment side (cash column).

May 31: Cash short is recorded on payment side (cash column) due to decrease in cash.

Total cash receipts during the period Rs.114,450 and total cash payments Rs.18,470. The balance of cash at the end of month Rs.95,980 (114,450 – 18,470 = 95,980). Total deposits into bank account during the month Rs.90,450 and total payment through bank Rs.43,570. The ending bank balance Rs.46,880 (90,450 – 43,570 = 46,880).


Chapter # 5



PRACTICE QUESTIONS Question # 1: 1991 Regular & Private – BIEK Hashim a sole trader uses Three-Column Cash Book. On March 1, 1991 he had cash on hand Rs.25,000 and cash in bank Rs.52,000. During the month of March 1991, he completed the following transactions:- March 3: Purchased merchandise for Rs.5,300 and issued a cheque for the amount. March 6: Cash sales deposited into bank Rs.6,000. March 8: Purchased office supplies for cash Rs.200. March 10: Received a cheque for Rs.4,900 from Mubarak in full settlement of his account of

Rs.5,000 and deposited the cheque into bank. March 15: Sold merchandise for cash Rs.2,500. March 18: Withdrew cash for personal use Rs.2,000. March 20: Issued cheque for Rs.2,450 to Ahmad in full settlement of his account of

Rs.2,500. March 24: Withdrew from bank Rs.5,000 for office use. March 27: Merchandise purchased for cash Rs.3,000. March 30: Salary paid by cheque Rs.3,500. REQUIRED

a) Enter the opening balances on March 1 and record the transactions in the Cash Book. b) Balance the Cash Book on March 31, 1991; close it and bring down cash and bank

balances on April 1, 1991. c) Set up T-accounts for Sales Discount and Purchase Discount and post the totals of

discount columns of the cash book. (Sales Discount account No. is 5001 and Purchase Discount account No. is 4003).

Question # 2: 1996 Regular & Private – BIEK Badar & Co. uses a three column Cash Book in their business. On January 1, 1996 the balances of cash on hand and cash at bank were Rs.4,000 and Rs.20,000 respectively. They completed the following cash transactions during the month of January 1996:- January 3: Cash sales Rs.6,000. January 5: Cash deposited into bank Rs.2,000. January 11: Received a cheque for Rs.2,040 from Ghani Sons in full settlement of their

account of Rs.2,200. January 12: Issued a cheque for Rs.1,250 to Nazim & Co. in full settlement of their account of

Rs.1,300. January 16: Purchased sales supplies for Rs.300 cash. January 18: Deposited into bank the cheque received from Ghani Sons. January 21: Advice received from bank that a customer Asif had made direct deposit in the

bank Rs.4,000. January 23: Purchased merchandise and paid by cheque Rs.1,000. January 25: Withdrew from bank Rs.300 for personal use and Rs.400 for office use. January 27: Sold merchandise for cash Rs.8,000. January 28: Paid for rent expense Rs.1,000 cash. January 30: Paid for salaries expense by cheque Rs.4,000. January 31: Cash was found over by Rs.20. REQUIRED

(i) Enter the opening balances and record the above transactions in the Cash Book. (ii) Balance the Cash Book on January 31, 1996 bringing down the cash and bank balances

on February 1, 1996. (iii) Set up T-accounts for Sales Discount and Purchase Discount in the ledger and post the

totals of the discount columns of the Cash Book into these accounts, giving posting


Chapter # 5


Sameer Hussain

reference. (Sales Discount account carries No.5001 and Purchase Discount account No. 4009).

Question # 3: 1997 Regular & Private – BIEK Karim & Co. uses a three column Cash Book in their business. On April 1, 1996 the balances of cash on hand and cash at bank were Rs.5,000 and Rs.8,000 respectively. The following are the cash transactions for the month of April 1996:- April 1: Cash sales Rs.3,000. April 4: Cash deposited into bank Rs.4,000. April 7: Received a cheque for Rs.975 from Saleem in full settlement of his account of

Rs.1,000. April 12: Issued a cheque for Rs.980 to Jamil & Co. in full settlement of their account of

Rs.1,000. April 14: Purchased sales supplies for cash Rs.200. April 17: Deposited into bank the cheque received on April 7 from Saleem. April 18: Advice received from the bank that one customer Naeem had made direct

deposit in the bank Rs.4,000. April 19: Purchased merchandise and paid by cheque Rs.3,000. April 23: Withdrew from bank Rs.400 for private use and Rs.600 for office use. April 25: Sold merchandise for cash Rs.3,000. April 27: Paid for rent expense cash Rs.400. April 29: Paid salaries expense by cheque Rs.1,500. April 30: Cash was found over by Rs.30. REQUIRED

(i) Enter the opening balances and record the above transactions in the Cash Book. (ii) Balance the Cash Book on April 31, 1996 bringing down the cash and bank balances on

May 1, 1996. (iii) Set up T-accounts for Sales Discount and Purchase Discount in the ledger and post the

totals of the discount columns of the Cash Book, Sales Discount account No. is 3001 and Purchase Discount account Number is 2001).

Question # 4: 2002 Private – BIEK Mr. Aslam, a sole trader, uses a Three Column Cash Book for his business. On June 1, 2001 he had cash on hand Rs.2,500 and cash in bank Rs.3,500. During the month, he completed the following transactions:- June 06: Received a cheque from Karim & Co. for Rs.240/- and allowed them discount

Rs.10/-. June 11: Deposited Karim & Co.’s cheque in the bank Rs.240/-. June 15: Issued a cheque for Rs.250/- to Sharif & Co. in full settlement of their account of

Rs.300/-. June 21: Deposited cash into bank Rs.1,000/-. June 27: Withdrew from bank for personal use Rs.300/-. June 30: Withdrew cash from bank for office use Rs.500/-. REQUIRED

a) Enter the opening balance and record the above transactions in a three-column Cash Book.

b) Balance the Cash Book on June 30, 2001 bringing down the Cash and Bank balance on July 1, 2001.

c) Set up T-accounts for Sales Discount and Purchase Discount accounts in the ledger and post the discount amounts of the Cash Book to these accounts, giving posting reference.


Chapter # 5



Question # 5: 2003 Private – BIEK On April 1, 2003 Mr. Inam has the following balances of cash on hand and at bank Rs.25,000/- and Rs.50,000/- respectively. He completed the following transactions during the month. Apr.02: Purchased furniture for cash Rs.7,000. Apr.03: Cash sales Rs.5,000 of which Rs.2,000 was deposited into bank. Apr.08: Purchased merchandise worth Rs.9,000. Giving Rs.4,000 cash and the balance by

cheque. Apr.09: Bought office supplies cash Rs.1,000. Apr.11: Sold merchandise worth Rs.4,000. Apr.13: Paid to supplier by cheque Rs.6,000 in full settlement of his account of Rs.6,200. Apr.16: Deposited cash into bank Rs.9,000. Apr.19: Advice received from bank that a customer had deposited Rs.4,000 direct into

the bank. Apr.21: Withdrew from bank Rs.1,500 for personal use. Apr.22: Received cash Rs.6,585 from Mr. Solangi in full settlement of Rs.6,700. Apr.23: Paid salaries Rs.8,000 cash. Apr.26: Paid rent for the month by cheque Rs.4,000. REQUIRED

(i) Record the above transactions in three-column cash book. (ii) Balance the cash book on April 30, 2003. (iii) Set up sales discount account No. 4003 and purchase discount account No. 5003 in ‘T’

form and post discount amounts in respective accounts. Question # 6: 2003 Regular – BIEK Rahat & Co. uses a three column Cash Book. On April 1, 2003 the balances of cash on hand and cash at bank were Rs.2,000 and Rs.3,940 respectively. The following are the transactions for the month of April, 2003:- Apr.2: Cash sales Rs.12,000. Apr.3: Cash deposit in bank Rs.7,000. Apr.8: Received cheque of Rs.1,950 from Junaid in full settlement of his account of Rs.2,000. Apr.12: Issued a cheque of Rs.890 to Shakeel in full settlement of his account of Rs.900. Apr.15: Deposited a cheque of Junaid in the bank. Apr.18: Advice received from the bank that a customer Atif had made direct deposit in the bank

Rs.5,000. Apr.22: Withdrew from bank Rs.4,000 for private use and Rs.6,000 for office use. Apr.24: Paid salaries by cheque Rs.7,000. Apr.28: Paid office rent Rs.3,000 cash. Apr.30: Purchased equipment for cash Rs.8,000. REQUIRED

a) Enter the opening balances and record the above transactions in the Cash Book. b) Balance the Cash Book on April 30, 2003 bringing down the cash and bank balances on

May 1, 2003. c) Set up ‘T’ accounts for sales discount and purchase discount in the Ledger and post the

totals of discount columns of the Cash Book. Question # 7: 2004 Regular & Private – BIEK M/s. Saad Traders uses three-column Cash Book in their business. The following transactions relate to the month of March 2004. March 01: Balance: Cash on hand Rs.25,000 and cash at bank Rs.25,000. March 02: Sold merchandise for cash Rs.15,000. March 06: Received a cheque form Mr. Owais for Rs.12,500 and allowed him discount of

Rs.500. The cheque was deposited in bank on the same day.


Chapter # 5


Sameer Hussain

March 10: Issued a cheque for Rs.11,500 to Mr. Muneeb in full settlement of his account of Rs.12,000.

March 12: Deposited cash into bank Rs.15,000. March 17: Purchased merchandise for cash Rs.5,000. March 24: Withdrew cash from bank for office use Rs.10,000. March 30: Paid salaries by cheque Rs.3,500. March 31: Withdrew cash for personal use Rs.2,500. REQUIRED

(i) Enter the opening balance and record the above transactions in Cash Book. (ii) Balance the Cash Book on March 31, 2004 bringing down the cash and bank balance on

April 1, 2004. (iii) Prepare ‘T’ accounts of Sales Discount and Purchase Discount and make posting therein.

Question # 8: 2005 Regular & Private – BIEK Mr. Taloot a sole trader uses a three column cash book for his business. On February 01, 2005, he has cash on hand Rs.25,000 and cash in bank (HBL) Rs.35,000. During the month he completed the following transactions: Feb.04, 05: Received a cheque of Rs.9,900 from Tanzeel in full settlement of his account

Rs.9,990. Feb.11, 05: Deposited Tanzeel’s cheque into the bank. Feb.15, 05: Issued a cheque for Rs.5,500 to Burhan in full settlement of his account Rs.5,550. Feb.21, 05: Deposited cash into bank Rs.1,000. Feb.26, 05: Withdrew cash Rs.3,000 from bank for personal use and Rs.5,000 for office use. Feb.28, 05: Paid salaries Rs.5,000 in cash. REQUIRED a) Enter the opening balances and record the above transactions in a three column Cash Book. b) Balance the Cash Book on February 28, 2005 bringing down the cash & bank balances on

March 01, 2005. c) Set up T-accounts for sales discount and purchase discount and post the discount amounts. Question # 9: 2010 Regular & Private – BIEK Mr. Asif uses three-column Cash Book. On November 1, 2009 he had cash in hand Rs.200,000 and cash at bank Rs.220,000. He completed the following transactions: Nov.13: Issued a cheque to Mr. Bilal for Rs.48,000 in full settlement of Rs.49,000. Nov.17: Received a cheque from Mr. Hamza for Rs.18,000 in full settlement of Rs.20,000

and deposited the cheque in bank on the same day. Nov.19: Sold merchandise on account for Rs.20,000 to Mr. Sadiq. Nov.23: Withdrew cash from bank for office use Rs.20,000. Nov.31: Paid salaries by cheque Rs.5,000. REQUIRED

(i) Record the above transactions in 3 columns Cash Book. (ii) Balance the Cash Book on November 30, 2009.

Question # 10: 1993 Regular & Private – BIEK Mr. Dinsha, a sole proprietor, uses a Three Column Cash Book. On March 1, 1993 cash on hand was Rs.18,000 and cash in bank Rs.20,500. During the month, he completed the following transactions:- March 1: Issued a cheque for Rs.500 for establishing a Petty Cash Fund. March 3: Received a cheque for Rs.4,900 from Mr. Ghani in full settlement of his account

Rs.5,000. March 5: Deposited Mr. Ghani’s cheque into bank.


Chapter # 5



March 7: Issued a cheque for Rs.2,940 to Sunrise Company in full settlement of their account of Rs.3,000.

March 8: Issued a cheque for Rs.4,000 in payment of a bill of exchange. March 11: Sold merchandise for cash Rs.10,500 of which of Rs.6,500 was deposited into

bank. March 15: Purchased merchandise for Rs.8,000 for which Rs.2,000 was paid in cash and a

cheque was issued for the balance of Rs.6,000. March 18: Withdrew cash from bank for use in office Rs.3,000. March 22: Withdrew cash from bank for personal use of the proprietor Rs.1,500. March 25: Collected Rs.5,000 cash at maturity of a bill receivable. March 31: Paid salaries to employees Rs.5,000 in cash. March 31: Issued a cheque for Rs.450 to replenish the Petty Cash Fund. (Debit

Miscellaneous Expense Account). REQUIRED a) Open the Cash Book with the balance on March 1, 1993 and record the transactions therein. b) Balance & rule off the Cash Book on March 31 and bring down the balance on April 1, 1993. c) Set up T-accounts for Sales Discount and Purchase Discount and make postings to them

giving date and reference. Question # 11: 1994 Regular & Private – BIEK Mr. Habeeb, the owner of Habeeb Company, uses a three column cash book. On May 1, 1994, cash on hand was Rs.30,000 and cash in bank Rs.50,000. The following transactions were completed during May 1994:- May1: Mr. Atif, a customer, owed Rs.9,000. Of this amount he settled Rs.4,500 by sending a

cheque for Rs.4,000 and availed of discount. May 3: Deposited Mr. Atif’s cheque into bank. May 6: account payable to Mr. Kamran amounted to Rs.7,000 of which Rs.5,000 was settled by

issuing a cheque for Rs.3,800 and availed of discount. May 10: Purchased merchandise for Rs.7,000 of which Rs.3,000 was paid in cash and balance

was paid by cheque. May 12: Mr. Habeeb withdrew cash from bank Rs.2,000 to pay a bill for his medical test. May 15: Sold merchandise for cash Rs.9,000 of which Rs.7,000 was deposited into bank. May 20: Withdrew from bank Rs.5,000 for office use. May 28: Paid for telephone bill for the month Rs.4,000 in cash. May 31: Paid by cheque salaries for the month Rs.12,000. REQUIRED a) Open the cash book with the balances on May 1, 1994 and record therein the transactions

for the month. b) Balance & rule off the Cash Book on March 31 and bring down the balance on April 1, 1993. c) Set up T-accounts for Sales Discount and Purchase Discount and make postings to them

giving date and reference. Question # 12: 2008 Regular & Private – BIEK Mr. Muhammad Usman uses a three column Cash Book in his business. On December 1, 2007 the balances of cash in hand and at bank were Rs.24,000 and Rs.36,000 respectively. The following transactions were completed in the month of December 2007: Dec. 1: Cash sales of Rs.15,000 which includes a cheque of Rs.5,000. Dec. 5: Cash Rs.5,000 and cheque of December 1 were deposited into bank. Dec. 7: Received payment from M/S Honda Atlas Car online Rs.5,000. Dec. 9: Sold merchandise for cash Rs.10,000. Dec.12: Withdrew from bank Rs.15,000 for office use and Rs.2,000 for private use. Dec.18: Received a cheque from Mr. Akram of Rs.19,000 after allowing him discount of Rs.1,000.


Chapter # 5


Sameer Hussain

Dec.22: Paid life insurance premium by cheque for Rs.4,000. Dec.26: Issued a cheque to Mr. Sardar for Rs.15,000 in full settlement of his account of

Rs.16,500. Dec.28: Deposited the cheque of Mr. Akram. REQUIRED (i) Enter the opening balances and record the above transactions in three-column Cash Book. (ii) Balance the Cash Book on 31.12.2007 and show the opening balances on January 1, 2008. (iii) Set up Purchase Discount no. 503 and Sales Discount no. 403 accounts in T-form and post

the totals therein. Question # 13: 1992 Regular & Private – BIEK Mr. Karim, a sole trader, uses a three column CASH BOOK. On May 1, 1992 the business had cash on hand Rs. 30,000 and cash in bank Rs. 20,000. During the month the following transactions were completed by Mr. Karim. May 1: Sold merchandise for cash Rs.15,000 of which Rs.10,000 were deposited into bank the

same day. May 3: Received a cheque for Rs.2,000 from Agha which was deposited into bank. May 5: Received rent in advance for six months in cash Rs.6,000 for a portion of the business

building layout. May 10: Agha’s cheque was returned by bank, having been dishonoured by his bank. May 12: Paid Fine Company invoice, Rs.5,000 less 2% discount, by cheque, in full settlement of

account. May 15: Received a cheque in full settlement of Baber Company invoice, Rs.8,000 less 2%

discount. May 17: Deposited Baber Company’s cheque into bank. May 20: Mr. Karim withdrew cash Rs.5,000 from bank for payment of his residential house rent. May 25: Withdrew cash from bank Rs.3,000 for business use. May 29: Purchased merchandise for cash Rs.6,500. May 30: Paid salaries to staff Rs.10,000 in cash. May 31: Cash was found short by Rs.10. REQUIRED a) Enter the balance on May 1 in the Cash Book and record the above transactions therein. b) Balance and rule off the cash book on May 31, and bring down the balances on June 1, 1992. c) Set up T- accounts for Sales Discount account and Purchase Discount account and make

postings to them, giving posting reference. Question # 14: 2000 Regular & Private – BIEK On January 1, 2000, Fine Traders had cash in hand Rs.15,000/= and cash in bank Rs.18,000/=. During January the following transactions were performed: January 1: Cash sales Rs.12,000/= deposited into bank. January 2: Received a cheque in settlement of A/Receivable from Easy Co. due less 2%

discount on an invoice of Rs.2,000/=. January 4: Deposited the Easy Co.’s cheque into bank. January 5: Issued a cheque to Right Co. in payment of its invoice of Rs.3,000/= less 3%

discount. January 7: The bank, on firm’s behalf, paid an interest bearing note: face amount Rs.3,000/=

and interest Rs.180/=. January 8: The bank, in firm’s behalf, collected an interest bearing note: face amount

Rs.5,000/= and interest Rs.300/=. January 12: Collected a past-due A/Receivable Rs.3,500/=. January 15: paid a past-due A/Payable Rs.1,800/=. January 20: Cash purchases of merchandise Rs.6,000.


Chapter # 5



January 25: Borrowed Rs.12,000/= from City Bank by issuing a 10%, 60 day note payable. January 31: Paid salaries for January 2000, Rs.4,500/=. January 31: Paid rent on the office building Rs.2,500/= and on the residential building

Rs.1,500/=. REQUIRED

a) Prepare Three-Money-Column Cash Book showing balances on January 1, 2000. b) Record the above transactions in the Cash Book, balance and rule off the Cash Book,

reporting the balance at Jan. 31, and at Feb. 1, 2000. Question # 15: 1999 Regular & Private – BIEK On June 1, 1998, Munawwar Mirza had cash on hand Rs.7,000 and cash in bank Rs.45,000. During the month he completed the following transactions:- June 2: Purchase merchandise for Rs.35,000 and issue a cheque for the amount. June 6: Purchase office supplies for cash Rs.750. June 8: Cash sales deposited into bank Rs.20,000. June 10: Received a cheque for Rs.58,500 from Muhammad Ali in full settlement of their

account of Rs.60,000 and deposited the same into bank. June 13: Cash sales of merchandise Rs.15,000. June 14: Advertising expense paid by cheque Rs.8,000. June 18: Withdrew cash from bank for office use Rs.2,500. June 21: Issued a cheque for Rs.13,700 to Haji Sons in full settlement of their account of

Rs.14,000. June 23: Withdrew cash form bank for personal use Rs.2,500. June 25: Purchase for cash Rs.2,000. June 26: Bank informed that overdraft limit had been sectioned worth Rs.20,000. June 28: Salaries paid to office employees Rs.15,000 by cheque. REQUIRED

a) Rule a three-column Cash Book and enter the opening balances on the debit side on June 1, 1998.

b) Record the transactions completed during the month. c) Balance the Cash Book on June 30, 1998, bringing down the Cash and Bank balances on

July 1, 1998. d) Make the postings of the discount columns in the appropriate accounts in the ledger.

Question # 16: 2012 Private – BIEK On March 01, 2012, Adnan Traders started business with a cash investment of Rs.9,000. The transactions for the month were as under: March 02: Purchase merchandise for cash Rs.3,000. March 03: Opened a bank account with Rs.1,000. March 05: Cash sales Rs.1,500. March 15: Paid to Alam by cheque Rs.1,500 in full settlement of his account of Rs.2,000. March 24: Received cash Rs.2,400 from Mehmood in full settlement of his account of

Rs.2,800 and deposited same into bank. March 31: Cash was found short by Rs.50. REQUIRED

(i) Record the above transactions in three column cash book Page No. 25. (ii) Balance the cash book on March 31, 2012. Bringing down the balance on April 01, 2012.

Question # 17: 2011 Private – BIEK Mr. Sultan started business by the name of Baaho Enterprises on April 1, 2011 with cash investment of Rs.50,000. During the month the following transactions were completed: April 05: Opened an account with the bank depositing cash Rs.10,000.


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Sameer Hussain

April 10: Purchased merchandise for cash Rs.5,000 and on account Rs.20,000 from Asif. April 14: Sold merchandise for cash Rs.9,000 and on credit Rs.16,000 to Adeel. April 20: Issued a cheque to Asif for Rs.9,800 as part payment. April 23: Mr. Adeel issued a cheque of Rs.9,800 in favour of Baaho Enterprises as part

payment. April 27: Deposited the above cheque of Adeel into the bank. REQUIRED

(a) Record the above transactions in three column cash book page No. 51. (b) Balance the cash book on April 30. Bring down the balance on May 1, 2011.

Question # 18: 2007 Regular & Private – BIEK April 2007:

01. Akbar brings Rs.16,000 cash and deposits Rs.20,000 into bank to start his business. 03. Sold merchandise for cash Rs.3,000. 08. Purchased equipment for cash Rs.8,000. 10. Received a cheque from a customer for Rs.2,940 after allowing 2% cash discount. 12. Deposited the cheque received on April 10. 20. Purchased a mobile phone by the owner for his personal use for cash Rs.2,000. 25. Purchased merchandise by cheque Rs.5,000. 28. Paid through cheque to a supplier Rs.3,920 in settlement of Rs.4,000. 29. Sold merchandise for cash Rs.2,500 and deposited Rs.2,000 into bank. 30. Paid rent by cheque Rs.3,000 and salaries to employees cash Rs.6,000.

REQUIRED Record the above transactions in Cash Book and balance the Cash Book. Question # 19: 2001 Regular & Private – BIEK On March 1, 2001 Mr. Aslam started a business with a cash investment of Rs.15,000 and completed the following transactions during the month. March 2: Purchased merchandise for cash Rs.5,000. March 3: Opened a bank account with Rs.5,000. March 4: Cash sales Rs.2,000. March 7: Purchased office supplies for cash Rs.1,500. March 10: Sold merchandise on account Rs.3,000. March 11: Paid to supplier by cheque Rs.770 in full settlement of his account of Rs.800. March 13: Deposited cash into bank Rs.3,000. March 15: Advice received from bank that a customer has deposited Rs.3,000 direct into

bank. March 18: Withdrew from bank for office use Rs.1,000. March 20: The proprietor purchased an office equipment for cash Rs.3,000 for business use

from his own pocket. March 23: Received cash Rs.3,850 from Mr. Babar in full settlement of Rs.4,000 and

deposited into bank. March 25: Paid salaries by cheque Rs.6,000. March 31: Paid rent for the month by cheque Rs.3,000. March 31: Cash is short by Rs.100. REQUIRED

a) Record the above transactions in 3-column cash book. b) Balance the cash book on March 31, 2001. c) Set up the sales discount a/c No.4003 and purchase discount a/c No.5003 in standard

form; post the discount amounts in respective accounts.


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Question # 20: 2012 Regular – BIEK Following are the selected transactions of Sanaullah Stores. Set up a three column cash book and make posting therein: March 1, 2012: Opening balances: Cash Rs.50,000 and Bank Rs.10,000 (overdraft). March 1, 2012: Sold merchandise for Rs.50,000 and deposited 80% amount into bank. March 3, 2012: A cheque of Rs.10,000 issued against invoice of 23rd February, under

credit term 2/10, n/30. March 8, 2012: Received a cheque of Rs.11,000 from Umair, a customer, against his

account of Rs.11,100 in full settlement. March 18, 2012: Deposited Umair’s cheque into bank. March 25, 2012: Received Rs.3,000 as advance from Shoaib for the goods to be sold after

two weeks. March 28, 2012: Withdrew cash for Rs.3,000 for personal use. Question # 21: 2013 Regular – BIEK On July 1, 2012, Orient Traders has cash in hand Rs.24,800/- and the balance on HBL account Rs.36,980/-. The following are the selected transactions during July 2012 relating to the business: July 03, 2012: Sold merchandise on cash Rs.12,000/-. July 09, 2012: Opened a current account of business in MCB with cash Rs.10,000/-. July 18, 2012: Received cheque for Rs.20,000/- from a customer. The cheque was deposited in

HBL on the same day. July 21, 2012: Purchased merchandise for Rs.18,400/- and issued a cheque from the cheque

book of HBL Rs.13,400/-. July 27, 2012: Issued a cheque of MCB Rs.5,000/- to petty cashier for establishing petty cash

fund. July 30, 2012: Transferred Rs.15,000/- from HBL to MCB account. REQUIRED Record the above transactions in cash book showing separate bank account.


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Sameer Hussain

MULTIPLE CHOICE QUESTIONS (MCQS) 1) Cash book is in a form of: a) Trial balance b) Ledger c) Journal d) All of the above 2) If the debit and credit aspects of a transaction are recorded in the cash book it is a: a) Contra entry b) Simple entry c) Double entry d) Single entry 3) Cheques received but deposited on the next day are recorded in: a) Cash column of the cash book b) Bank column of the cash book c) Both of these d) None of these 4) Which of the following is the kind of a cash book? a) Single column cash book b) Double column cash book c) Three column ash book d) All of the above 5) Which of the following is not a column of a three column cash book? a) Cash column b) Bank column c) Petty cash column d) Discount column

6) Salaries due for the month of March will appear: a) On the receipt side of the cash book b) On the payment side of the cash book c) As a contra entry d) Not in the cash book 7) Contra entries are passed only when: a) Double column cash book is prepared b) Three column cash book is prepared c) Simple cash book is prepared d) None of the above 8) Purchase of machinery for business on cash is recorded in: a) Purchase journal b) General journal c) Cash book d) Purchase return journal 9) A three Columnar Cash Book records: a) All cash transactions only b) Both cash and bank transactions excepting discounts c) All Cash transactions excepting cash purchases and cash sales d) Both cash and bank transactions including discounts 10) A customer’s cheques returned dishonoured is recorded in: a) Purchase return book b) Sales return book c) Cash book d) Journal

11) Cash sales are recorded in: a) Sales book b) Cash book c) Journal d) Petty cash book

12) The discount column of a triple-column cash book records: a) Trade discount b) Cash discount c) Quantity discount d) Seasonal discount

13) The balance of cash account indicates: a) Net income for the period b) Net loss for the period c) Net cash on hand d) Net worth of the business


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14) Discount column in the cash book should be: a) Totaled b) Balanced c) Totaled and balanced d) Do nothing

15) Cash column in cash book always has: a) Credit balance b) Debit balance c) Both (a) and (c) d) None of the above

16) Cheque received deposited in bank at a later date will be recorded in _______ column: a) Cash b) Bank c) Discount d) None

17) Cheque received dishonoured will be recorded in: a) Cash column debit side b) Cash column credit side c) Bank column debit side d) Bank column credit side

18) Bank charges debited by bank will be recorded in: a) Cash column debit side b) Cash column credit side c) Bank column debit side d) Bank column credit side

19) Interest charged by bank will be recorded in: a) Cash column debit side b) Cash column credit side c) Bank column debit side d) Bank column credit side

20) Interest credited by bank will be recorded in: a) Cash column debit side b) Cash column credit side c) Bank column debit side d) Bank column credit side

21) Total of discount column on the debit side of cash book will be: a) Posted to debit of discount account b) Posted to credit of discount account c) Posted to bank account d) Posted to credit of customer account

22) Total of discount column on the credit side of cash book will be: a) Posted to debit of discount account b) Posted to credit of discount account c) Posted to bank account d) Posted to credit of customer account

23) Payment of rent expense is recorded on: a) Receipt side b) Payment side c) Income side d) Expense side

24) Introducing capital by owner of business is recorded on: a) Receipt side b) Payment side c) Income side d) Expense side

25) A simple or one column cash book usually has: a) Bank column b) Payment column c) Discount column d) Cash column

26) Cash book is used for recording: a) All cash transactions b) All cash and credit transactions c) Cash receipts only d) Cash payments only

27) Cash book serves the purpose of: a) Journal b) Ledger c) Trial balance d) Financial statement


Chapter # 5


Sameer Hussain

28) A cheque is received for Rs.4,000 and recorded in the bank column receipt side of cash book, the balance of cash will show:

a) No effect b) Balance c) Overstatement d) Understatement 29) Contra entries are recorded on: a) Receipt side of a cash book b) Both sides of a cash book c) Payment side of a cash book d) Receipt side of a petty cash book

30) The most suitable book for recording purchase of merchandise on cash is: a) Purchase journal b) General journal c) Cash book d) Petty cash book

31) A cash book may be called a three-column cash book due to the three columns of: a) Date, Particulars, P/R b) Discount, Cash, Bank c) Date, Cash, Bank d) Sales discount, Purchase discount, Cash

32) A debit balance of Rs.100 in a cash account shows that: a) There was Rs.100 cash in hand b) Cash has been overspent by Rs.100 c) Rs.100 was the total of cash paid out d) The total of cash received was less than Rs.100 33) In cash book, purchase discount is shown on: a) Receipt side of cash book b) Payment side of cash book c) Petty cash book d) Trial balance

Documents

Chapter # 5a4accounting.weebly.com/uploads/7/1/2/8/7128209/chapter...Cash book are of three types: Simple Cash Book: Only actual cash transactions are recorded in this book. It is