II. Very Short Answer Questions

Question 1.
What is cash book?
Answer:
Cash book is the book in which only cash transactions are recorded in the chronological order. The cash book is the book of original entry or prime entry as cash transactions are recorded for the first time in it. Cash transactions here may include bank transactions also. Cash receipts are recorded on the debit side while cash payments are recorded on the credit side.

Question 2.
What are the different types of cash book?
Answer:
The main cash book may be of various types and following are the three most common types.

  1. Simple or single column cash book (only cash column)
  2. Cash book with cash and discount column (double column cash book)
  3. Cash book with cash, discount and bank columns (three column cash book)


Question 3.
What is simple cash book?
Answer:
Single column cash book or simple cash book, like a ledger account has only one amount column, i.e., cash column on each side. Only cash transactions are recorded in this book. All cash receipts and payments are recorded systematically in this book.

Question 4.
Give the format of ‘Single column cash book’.
Answer:
Simple Cash Book

Check book for answer pgno: 128

Question 5.
What is double column cash book?
Answer:
It is a cash book with cash and discount columns. As there are two columns, i.e., discount and cash columns, both on debit and credit sides, this cash book is known as ‘double column cash book’.

Question 6.
Give the format of ‘Double column cash book’.
Answer:
Cash book with cash and discount columns

check book for answer pgno: 133

Question 8.

What is cash discount?
Answer:
Cash discount is allowed to the parties making prompt payment within the stipulated period of time or early payment. It is discount allowed (loss) for the creditor and discount received (gain) for the debtor who makes payment. The discount is allowed when payment is received or made and hence, the entry for discount is also passed with the entry of payment. The earlier the payment, the more may be the discount. Cash discount motivates the debtor to make the payment at an earlier date to avail discount facility.


Question 9.
What is trade discount?
Answer:
Trade discount is a deduction given by the supplier to the buyer on the list price or catalogue price of the goods. It is given as a trade practice or when goods are purchased in large quantities. It is shown as a deduction in the invoice. Trade discount is not recorded in the books of accounts. Only the net amount is recorded.

III. Short Answer Questions


Question 2.
Bring out the differences between cash discount and trade discount.
Answer:
Following are the difference between cash discount and trade discount:

check book pg no: 132


Question 4.
Write a brief note on accounting treatment of discount in cash book.
Answer:
In the discount columns, cash discount, i.e., cash discount allowed and cash discount received are recorded. The net amount received is entered in the amount column on the debit side and the net amount paid is entered in the amount column on the credit side. For the seller who allows cash discount, it is a loss and hence it is debited and shown on the debit side of the cash book. For the person making payment, discount received is a gain because less payment is made and it is credited and shown on the credit side of the cash book.

IN THIS UNIT EXERCISE PROBLEMS 5 TO 8 IS DELETED.