Accounting Notes: Cash/Subsidiary Books and Ledger | PAPER III – ACCOUNTING & FINANCIAL MANAGEMENT FOR BANKERS | MODULE B: FINANCIAL STATEMENTS AND CORE BANKING SYSTEMS

Maintenance of Cash/Subsidiary Books and Ledger

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Record Keeping Basics

Record keeping involves systematically documenting financial transactions. Key books include:

• Cash Book: Records all cash transactions
• Subsidiary Books: Special journals for specific transaction types (purchases, sales, etc.)
• Ledger: Principal book containing all accounts

Account Categories

Accounts are classified into five main categories:

1. Assets: Resources owned by the business
2. Liabilities: Obligations of the business
3. Capital/Owner's Equity: Owner's claim on assets
4. Revenue/Income: Earnings from operations
5. Expenses: Costs incurred to generate revenue

Debit and Credit Concepts

The double-entry system requires every transaction to have equal debit and credit effects:

Account Type	Debit Effect	Credit Effect
Assets	Increase	Decrease
Liabilities	Decrease	Increase
Capital	Decrease	Increase
Revenue	Decrease	Increase
Expenses	Increase	Decrease

Accounting and Columnar Accounting Mechanics

Columnar accounting uses multiple columns to record transactions efficiently:

• Cash books often have columns for date, particulars, voucher number, ledger folio, and amount
• Three-column cash books include cash, bank, and discount columns
• Helps in classification and summarization of transactions

Journalising

The process of recording transactions in the journal involves:

1. Identifying affected accounts
2. Determining account types
3. Applying debit/credit rules
4. Recording date, particulars, amounts, and brief narration

MCQs with Answers

1. Which book records all cash transactions?

   A) Purchase Book
   B) Cash Book
   C) Sales Book
   D) Journal

   Answer: B) Cash Book

2. Accounts receivable is classified as:

   A) Liability
   B) Asset
   C) Expense
   D) Revenue

   Answer: B) Asset

3. When an asset increases, it is:

   A) Credited
   B) Debited
   C) Both
   D) Neither

   Answer: B) Debited

4. The principal book of accounts is called:

   A) Journal
   B) Ledger
   C) Cash Book
   D) Trial Balance

   Answer: B) Ledger

5. Which column is NOT typically found in a cash book?

   A) Date
   B) Particulars
   C) Voucher Number
   D) Profit Calculation

   Answer: D) Profit Calculation

6. Recording a transaction in the journal is called:

   A) Posting
   B) Journalising
   C) Balancing
   D) Summarizing

   Answer: B) Journalising

7. Which account would be credited when goods are sold on credit?

   A) Cash
   B) Sales
   C) Purchases
   D) Bank

   Answer: B) Sales

8. A three-column cash book includes all EXCEPT:

   A) Cash column
   B) Bank column
   C) Discount column
   D) Inventory column

   Answer: D) Inventory column

9. Which account increases with a credit entry?

   A) Equipment
   B) Accounts Payable
   C) Rent Expense
   D) Cash

   Answer: B) Accounts Payable

10. The process of transferring journal entries to ledger accounts is called:

    A) Journalising
    B) Posting
    C) Balancing
    D) Auditing

    Answer: B) Posting