Page 47 - NOTES- CASH BOOK

140 Accountancy

3. Rectification entries: To rectify errors in recording transactions in the
books of original entry and their posting to ledger accounts this journal is
used.
4. Transfer entries: Drawing account is transferred to capital account at the
end of the accounting year. Expenses accounts and revenue accounts
which are not balanced at the time of balancing are opened to record specific
transactions. Accounts relating to operation of business such as Sales,
Purchases, Opening Stock, Income, Gains and Expenses, etc., and drawing
are closed at the end of the year and their Total/balances are transferred
to Trading and Profit and Loss account by recording the journal entries.
These are also called closing entries.
5. Other entries: In addition to the above mentioned entries in the points
number 1 to 4, recording of the following transaction is done in the
journal proper :
(i) At the time of a dishonour of a cheque the entry for cancellation for
discount received or discount allowed earlier.
(ii) Purchase/sale of items on credit other than goods.
(iii) Goods withdrawn by the owner for personal use.
(iv) Goods distributed as samples for sales promotion.
(v) Endorsement and dishonour of bills of exchange.
(vi) Transaction in respect of consignment and joint venture, etc.
(vii) Loss of goods by fire/theft/spoilage.

Test Your Understanding - I

Select the Correct Answer
(a) When a firm maintains a cash book, it need not maintain ;
(i) Journal Proper
(ii) Purchases (journal) book
(iii) Sales (journal) book
(iv) Bank and cash account in the ledger
(b) Double column cash book records:
(i) All transactions
(ii) Cash and bank transactions
(iii) Only cash transactions
(iv) Only credit transactions
(c) Goods purchased on cash are recorded in the :
(i) Purchases (journal) book
(ii) Sales (journal) book
(iii) Cash book
(iv) Purchases return (journal) book

2018-19