Subsidiary Books and Cash Book (Including Bank Reconciliation Statement) Questions

Question 1

Define subsidiary books.

Accepted Answer

Subsidiary books are special journals maintained to record similar transactions separately, such as purchases book, sales book and returns books.

Question 2

What is a cash book?

Accepted Answer

Cash book is a book of original entry in which all cash and bank transactions are recorded; it also serves as a ledger for cash and bank.

Question 3

Define contra entry.

Accepted Answer

Contra entry is an entry in a double/triple column cash book where one effect is in cash column and the other effect is in bank column, such as cash deposited into bank.

Question 4

What is pass book?

Accepted Answer

Pass book is the statement prepared by the bank showing the customer’s account transactions and balance as per bank’s records.

Question 5

What is BRS?

Accepted Answer

Bank Reconciliation Statement is a statement prepared to reconcile the bank balance as per cash book with the bank balance as per pass book.

Question 6

State one reason for difference between cash book and pass book.

Accepted Answer

Cheques issued but not presented for payment is a common reason for difference between cash book and pass book balances.

Question 7

Explain the advantages of subsidiary books.

Accepted Answer

Subsidiary books (special journals) are maintained when transactions are numerous. They offer several advantages: (i) **division of work**—different clerks can handle different books (purchases, sales, returns, etc.); (ii) **time saving**—similar transactions are recorded in one place and totals are posted periodically; (iii) **better control and accuracy**—specialisation reduces mistakes and makes checking easier; (iv) **easy posting**—totals from subsidiary books are posted to ledger, reducing ledger workload; and (v) **quick information**—credit sales, credit purchases, returns and bills can be known quickly from respective books.

Question 8

Differentiate between cash book and pass book.

Accepted Answer

Cash book is maintained by the business to record cash and bank transactions. Pass book (bank statement) is maintained by the bank to record transactions of the customer’s account from the bank’s viewpoint. In cash book, bank column increases are recorded on the debit side (receipts) and decreases on the credit side (payments). In pass book, deposits are credited and withdrawals are debited because the bank treats customer deposits as its liability. Thus, cash book is a business record; pass book is a bank record.

Question 9

Explain imprest system of petty cash.

Accepted Answer

Under the imprest system, a fixed amount (imprest) is given to the petty cashier at the beginning of a period. Petty expenses such as postage, conveyance and stationery are paid out of this amount. At the end of the period, the petty cashier is reimbursed exactly by the amount spent so that the petty cash balance is restored to the original imprest. This system provides control over small expenses and makes petty cash management systematic.

Question 10

State the causes of difference in BRS.

Accepted Answer

Differences between cash book bank balance and pass book balance arise due to timing and recording differences, such as: (i) cheques issued but not yet presented; (ii) cheques deposited but not yet collected; (iii) bank charges, interest, and commission recorded by bank but not yet entered in cash book; (iv) direct deposits by customers or direct payments by bank; (v) dishonour of cheques/bills; and (vi) errors in cash book or pass book.

Question 11

Prepare BRS from cash book balance ₹10,000 (Dr.) given: cheques issued not presented ₹2,000; bank charges ₹100; cheques deposited not collected ₹1,500.

Accepted Answer

Starting with bank balance as per cash book (Dr.) ₹10,000:

Add: Cheques issued but not presented ₹2,000 → ₹12,000
Less: Bank charges ₹100 → ₹11,900
Less: Cheques deposited but not collected ₹1,500 → ₹10,400

Therefore, bank balance as per pass book = **₹10,400 (Dr.)**.

Question 12

Write a short note on triple column cash book.

Accepted Answer

Triple column cash book contains three columns on each side: cash, bank and discount. It records cash receipts/payments, bank receipts/payments (cheques, deposits, withdrawals) and also records discount allowed and discount received. It simplifies recording of discount transactions and provides a combined record of cash and bank movements with discount details.

Question 13

Explain various subsidiary books and their uses.

Accepted Answer

Subsidiary books are special journals used to record similar transactions separately to save time and improve control. Important subsidiary books are: Purchases Book (credit purchases of goods), Sales Book (credit sales of goods), Purchases Returns Book (returns to suppliers), Sales Returns Book (returns from customers), Bills Receivable Book (bills received), Bills Payable Book (bills accepted), Cash Book (cash and bank transactions), and Journal Proper (adjustments and transactions not recorded elsewhere). Maintaining these books enables division of work, easy posting (periodic totals), and quick reference for specific types of transactions.

Question 14

Explain bank reconciliation statement and the causes of differences between cash book and pass book balances.

Accepted Answer

Bank Reconciliation Statement (BRS) is prepared to reconcile the bank balance as per cash book with the bank balance as per pass book on a given date. It is necessary because both records are maintained by different parties and certain items are recorded at different times.

Major causes of differences include: cheques issued but not yet presented for payment; cheques deposited but not yet collected; bank charges and interest debited by bank; interest and collections credited by bank; direct deposits by customers; direct payments by bank; dishonour of cheques; and errors in recording. BRS identifies these items and adjusts them so that both balances can be matched.

Question 15

Explain cash book and its types. Also explain contra entries.

Accepted Answer

Cash book is a book of original entry in which all cash and bank transactions are recorded. It also serves as a ledger for Cash and Bank accounts.

**Types of cash book:** (i) Single column cash book—records cash only; (ii) Double column cash book—records cash and bank; (iii) Triple column cash book—records cash, bank and discount.

**Contra entries:** Contra entries are transactions involving transfer between cash and bank (cash deposited into bank or cash withdrawn from bank for office use). In such cases, both cash and bank columns are affected and the entry is recorded on both sides of the cash book and marked as contra (C) because no separate ledger posting is required.

Subsidiary Books and Cash Book (Including Bank Reconciliation Statement)

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