Accounting Q&A · Financial Accounting · Topic 10
When a shop deposits money from its till into the bank, both cash book columns change. These questions help you choose the right columns and check the closing balances.
25 short-answer questions. Try each question before revealing the answer.
Worked contra entry
A shop has 600 in its till and 1,000 at the bank. It deposits 450 from the till. Record a 450 bank debit and a 450 cash credit. The new balances are 150 cash and 1,450 bank. Together they still total 1,600.
Test yourself with the Cash Book quiz.
Cash book formats and petty cash
1. What is a cash book?
A record of cash receipts and payments that also serves as the ledger for the cash and, when included, bank accounts.
2. Which transactions belong in a single-column cash book?
Cash receipts and cash payments. Credit sales and purchases enter when cash is collected or paid.
3. Which side records cash receipts?
The debit side records receipts because cash increases.
4. Which side records cash payments?
The credit side records payments because cash decreases.
5. What is a two-column cash book?
A cash book with two amount columns per side. Common formats pair cash with bank or cash with discounts, so check the headings.
6. What does a three-column cash book track?
It typically tracks cash, bank and discounts on each side.
7. How does petty cash differ from the main cash book?
Petty cash records small payments made from a separate fund, such as postage or minor office supplies.
8. How does an imprest petty cash fund work?
Set a fixed authorised amount. Replenish the fund for supported payments so it returns to that amount.
9. A petty cash fund is 200 and receipts support spending of 143. How much should remain?
57 in cash, assuming there are no other movements.
10. How much replenishes that fund to 200?
143, assuming the count agrees with the receipts.
11. What should a petty cashier do when counted cash is short?
Recount, check vouchers and investigate. Record any verified shortage according to policy and obtain approval.
Contra entries and discounts
12. What is a contra entry in a cash and bank cash book?
A transfer recorded in both columns because it moves money between the business’s cash on hand and its bank account.
13. How do you record depositing 450 of office cash into the bank?
Enter 450 in the bank debit column and 450 in the cash credit column.
14. How do you record withdrawing 120 from the bank for the cash till?
Enter 120 in the cash debit column and 120 in the bank credit column.
15. Why should a bank-to-cash transfer be recorded as a contra entry?
It changes the location of the money. The two postings show the movement without recording revenue or expense.
16. Where is discount allowed recorded in a traditional three-column cash book?
Record it in the discount column on the debit side with the customer receipt. The discount reduces what the customer must pay.
17. Where is discount received recorded?
Record it in the discount column on the credit side with the payment to the supplier.
18. A customer owes 500 and pays 480 in full settlement. What goes in the receipt columns?
Enter 480 in the cash or bank column used and 20 in the discount allowed column.
19. A supplier accepts 970 by bank transfer to settle 1,000. What goes in the payment columns?
Enter 970 in the bank credit column and 30 in the discount received column.
20. Are discount columns balanced and carried forward like cash and bank columns?
Discount columns are totalled for posting to their respective ledger accounts. Cash and bank columns carry running or closing balances.
Balancing and reconciliation
21. Cash opens at 320, receipts are 610 and payments are 500. What is closing cash?
430 debit. Calculate 320 plus 610 minus 500.
22. Can the bank column show a credit balance?
Yes. A credit balance can indicate a bank overdraft. Check the bank agreement and reconcile the amount.
23. How should a bank fee found on the statement be entered?
If the fee has not been recorded, debit Bank Charges Expense and credit Bank in the cash book.
24. Does a deposit in transit require a second cash book entry?
If correctly recorded already, list it as a timing difference on the bank reconciliation and check that it clears.
25. What checks should you make before closing the cash book?
Reconcile cash to the physical count, reconcile the bank column to the statement, and investigate unsupported payments or discrepancies.