Question

6. The following statements relate to cash transactions:

(a) All transactions dealing with cash received is entered into the cash receipts journal.

(b) Irrespective of how many entries there may be in the cash receipts journal, only the total of each column will need to be posted to the relevant general ledger account, except for the sundries column where entries will be posted individually.

(c) Under a perpetual inventory system, the cost of goods sold is recorded as each transaction takes place. When goods are sold for cash a column in the cash receipts journal is added to collect the data regarding cost price.

(d) Only original receipts can be used as source documents to record transactions in the cash receipts journal.

Which one of the following groups correctly reflects all the statements that are true?

(1) (a), (b), (c)

(2) (a), (b), (d)

(3) (c), (d)

(4) (b), (d)

(5) (a), (b), (c), (d)

7. The following statements relate to a bank reconciliation:

(a) Amounts deposited directly into the current account of the entity by third parties, will have to be entered on the cash payments journal when the bank reconciliation is being done.

(b) Bank charges and debit orders that appear on the bank statement of the entity but not in the bank account, in the general ledger, of the entity will have to be entered onto the cash receipts journal when the bank reconciliation is being done.

(c) Errors made by the bank will have to be corrected by the bank and will appear nowhere when the bank reconciliation is being done.

(d) A credit balance in the bank statement and a debit balance in the entity’s bank account in the ledger show a favourable bank balance. Which one of the following groups correctly reflects all the statements that are true?

(1) (a), (b), (c)

(2) (a), (b), (d)

(3) (c), (d)

(4) (b), (d)

(5) Only (d)

Answer 1

Question 6:

Answer: 1. (a), (b), (c)

Explanations:

The first statement is true as all the transactions that are related to cash receipts are recorded in the cash receipts journal, and the totals of each column in the cash receipts journal are posted to the respective ledger account only the entries in the sundries column are recorded individually as and when a transaction is recorded in the sundries column. Under perpetual inventory system cost of goods sold is recorded as and when an inventory is sold. Hence, in this system a separate cost of goods sold column is added in the cash receipts journal to account for the cost of goods sold for case sales transactions. Only the last statement is not correct as some other evidences are also used to record entries in the cash receipts journal such as the interest received entry is recorded based on the bank statement.

Question 7:

Answer: 5. Only (d)

A credit balance in the bank statement denotes a favourable or positive balance in cash also a debit balance in the cash ledger denotes the same. Amount deposited by a third party into the bank will be recorded in the cash receipts journal and not in the cash payments journal. Bank charges or any debit made by the bank should be recorded in the cash payments journal and not in the cash receipts journal. Errors made by bank should also be shown in the bank reconciliation statement temporarily and later on it will be adjusted by the bank.