MCQ’s on Cash Book and Subsidiary Books

1. Which of the following is recorded in the Purchases Book?
(a) Cash purchases
(b) Credit purchases of goods
(c) Purchase of fixed assets
(d) Returns of goods
(e) Bank withdrawals
Answer: (b) Credit purchases of goods

2. The Purchases Returns Book records:
(a) Purchases returned to suppliers
(b) Sales returned by customers
(c) Fixed asset purchases
(d) Cash purchases of goods
(e) Sales of services
Answer: (a) Purchases returned to suppliers

3. The Sales Book is used to record:
(a) Cash sales of goods
(b) Credit sales of goods dealt in
(c) Return of sold goods
(d) Credit purchases of goods
(e) Cash payments
Answer: (b) Credit sales of goods dealt in

4. The primary purpose of subsidiary books is to:
(a) Record all transactions in a single journal
(b) Facilitate the division of accounting work
(c) Record only cash transactions
(d) Record financial statements
(e) Calculate taxes
Answer: (b) Facilitate the division of accounting work

5. Which of the following is not considered a subsidiary book?
(a) Sales Book
(b) Purchase Book
(c) Cash Book
(d) Ledger
(e) Returns Inward Book
Answer: (d) Ledger

6. Which of the following items is not recorded in the Purchases Book?
(a) Credit purchases of goods
(b) Cash purchases of goods
(c) Returns of purchased goods
(d) Credit purchases of raw materials
(e) Trade discount received
Answer: (b) Cash purchases of goods

7. The Sales Returns Book is also known as the:
(a) Purchase Book
(b) Returns Inward Book
(c) Returns Outward Book
(d) Cash Book
(e) Journal
Answer: (b) Returns Inward Book

8. Transactions recorded in the Purchase Returns Book include:
(a) Purchases of goods
(b) Returns of goods purchased on credit
(c) Returns of goods sold on credit
(d) Purchase of fixed assets
(e) Cash purchases
Answer: (b) Returns of goods purchased on credit

9. The total of the Purchases Book at the end of the month is posted to:
(a) Credit side of Purchases Account
(b) Debit side of Purchases Account
(c) Debit side of Sales Account
(d) Credit side of Capital Account
(e) Debit side of Returns Account
Answer: (b) Debit side of Purchases Account

10. The Credit Sales of goods is recorded in:
(a) Sales Book
(b) Cash Book
(c) Returns Inward Book
(d) Purchase Book
(e) General Journal
Answer: (a) Sales Book

11. Cash purchases of goods are entered in the:
(a) Sales Book
(b) Journal Proper
(c) Cash Book
(d) Purchases Book
(e) Bills Payable Book
Answer: (c) Cash Book

12. The Subsidiary Books include all the following except:
(a) Sales Book
(b) Purchases Book
(c) Ledger
(d) Bills Receivable Book
(e) Journal Proper
Answer: (c) Ledger

13. If a firm returns goods that it had earlier purchased on credit, the transaction is recorded in the:
(a) Purchases Book
(b) Sales Returns Book
(c) Purchases Returns Book
(d) Sales Book
(e) Bills Payable Book
Answer: (c) Purchases Returns Book

14. When sales are returned by customers, they are recorded in:
(a) Returns Inward Book
(b) Returns Outward Book
(c) Sales Book
(d) Purchases Returns Book
(e) General Ledger
Answer: (a) Returns Inward Book

15. Which of the following books is used for recording transactions that cannot be recorded in any other subsidiary books?
(a) Journal Proper
(b) Sales Book
(c) Purchases Returns Book
(d) Bills Payable Book
(e) Ledger
Answer: (a) Journal Proper

16. The Cash Book is a type of:
(a) Subsidiary book only
(b) Principal book only
(c) Subsidiary book and a principal book
(d) General ledger
(e) Journal
Answer: (c) Subsidiary book and a principal book

17. A Simple Cash Book records:
(a) Cash receipts and cash payments only
(b) Cash receipts and credit sales
(c) Credit purchases and credit sales
(d) Bank receipts and payments only
(e) All transactions
Answer: (a) Cash receipts and cash payments only

18. A DoubleColumn Cash Book contains:
(a) Cash and credit columns
(b) Cash and discount columns
(c) Sales and purchases columns
(d) Discount and tax columns
(e) Bank and ledger columns
Answer: (b) Cash and discount columns

19. Which of the following is not a feature of the Petty Cash Book?
(a) It records small payments
(b) It uses the imprest system
(c) It replaces the main Cash Book
(d) It is a type of subsidiary book
(e) It requires reimbursement periodically
Answer: (c) It replaces the main Cash Book

20. Contra entries are found in a:
(a) Simple Cash Book
(b) Sales Book
(c) DoubleColumn Cash Book
(d) ThreeColumn Cash Book
(e) Journal
Answer: (d) ThreeColumn Cash Book

21. A ThreeColumn Cash Book includes columns for:
(a) Cash, Sales, and Purchases
(b) Cash, Bank, and Discount
(c) Cash, Bank, and Credit
(d) Cash, Petty Cash, and Bank
(e) Discount, Credit, and Bank
Answer: (b) Cash, Bank, and Discount

22. Which of the following columns is not found in a ThreeColumn Cash Book?
(a) Cash column
(b) Bank column
(c) Petty cash column
(d) Discount column
(e) Payments column
Answer: (c) Petty cash column

23. A contra entry is used when:
(a) Goods are purchased on credit
(b) Cash is withdrawn from the bank for office use
(c) Goods are returned to the supplier
(d) Goods are sold on credit
(e) Interest is earned on a bank deposit
Answer: (b) Cash is withdrawn from the bank for office use

24. Which of the following is a contra entry?
(a) Credit purchase of goods
(b) Transfer of funds from cash to bank
(c) Payment to a supplier
(d) Receipt of a loan from the bank
(e) Payment of interest on a loan
Answer: (b) Transfer of funds from cash to bank

25. The petty cash book is maintained using which system?
(a) LIFO System
(b) FIFO System
(c) Imprest System
(d) Contra System
(e) Manual System
Answer: (c) Imprest System

26. The main purpose of the Petty Cash Book is to:
(a) Record large payments only
(b) Record cash receipts
(c) Record small payments and expenses
(d) Prepare the final accounts
(e) Record returns of goods
Answer: (c) Record small payments and expenses

27. What is a key characteristic of the Simple Cash Book?
(a) It records credit transactions only
(b) It has columns for cash and discount
(c) It has one column each for receipts and payments
(d) It records only transactions related to the bank
(e) It includes both cash and credit sales
Answer: (c) It has one column each for receipts and payments

28. When balancing a Simple Cash Book, the balance carried down represents:
(a) The total cash received
(b) The total of payments made
(c) Cash available at the end of the period
(d) Credit balance in the bank account
(e) Total discount allowed
Answer: (c) Cash available at the end of the period

29. In a DoubleColumn Cash Book, the discount columns are:
(a) Balanced at the end of the month
(b) Used to post to the ledger accounts
(c) Simply totaled and transferred to the discount account
(d) Used to calculate profit
(e) Included in the bank balance
Answer: (c) Simply totaled and transferred to the discount account

30. A cheque dishonored by the bank is recorded in the:
(a) Cash column of the Cash Book
(b) Bank column on the debit side of the Cash Book
(c) Bank column on the credit side of the Cash Book
(d) Discount column of the Cash Book
(e) Purchases Returns Book
Answer: (c) Bank column on the credit side of the Cash Book

31. In the ThreeColumn Cash Book, when cash is deposited into the bank, the entry is made:
(a) In the cash column on the credit side and bank column on the debit side
(b) In the cash column on the debit side only
(c) In the discount column on the debit side
(d) In the bank column on the credit side
(e) In the cash column on both sides
Answer: (a) In the cash column on the credit side and bank column on the debit side

32. In case of a bank overdraft, the bank balance is shown:
(a) On the credit side of the bank column
(b) On the debit side of the bank column
(c) On both the debit and credit sides of the cash column
(d) On the debit side of the cash column
(e) On the credit side of the petty cash column
Answer: (a) On the credit side of the bank column

33. If a customer pays their debt early and is offered a discount, the discount allowed is recorded in the:
(a) Cash column of the Cash Book
(b) Petty Cash Book
(c) Discount column on the receipts side of the Cash Book
(d) Bank column of the Cash Book
(e) Sales Returns Book
Answer: (c) Discount column on the receipts side of the Cash Book

34. A contra entry is needed when:
(a) Money is transferred from the cash account to the bank account
(b) Goods are sold on credit
(c) Interest is earned on a bank deposit
(d) A promissory note is issued
(e) A payment is made to a creditor
Answer: (a) Money is transferred from the cash account to the bank account

35. If a cheque received is dishonored, it will be recorded on the:
(a) Debit side of the Bank column
(b) Credit side of the Bank column
(c) Debit side of the Cash column
(d) Credit side of the Cash column
(e) Discount column
Answer: (b) Credit side of the Bank column

36. The imprest amount in the Petty Cash Book refers to:
(a) The total amount paid out in a period
(b) The fixed amount of cash kept for petty expenses
(c) The total sales made in cash
(d) The closing balance in the Cash Book
(e) The amount deposited in the bank account
Answer: (b) The fixed amount of cash kept for petty expenses

37. Which of the following is not an advantage of the Petty Cash Book?
(a) Saving time of the chief cashier
(b) Reducing errors in the main Cash Book
(c) Facilitating the recording of small payments
(d) Recording large business transactions
(e) Controlling small payments
Answer: (d) Recording large business transactions

38. A Petty Cashier is generally reimbursed:
(a) When they request money
(b) At the end of every day
(c) At regular intervals, usually weekly or fortnightly
(d) When the cash balance is zero
(e) At the start of every business year
Answer: (c) At regular intervals, usually weekly or fortnightly

39. The Petty Cash Book records payments for:
(a) Large purchases of machinery
(b) Small payments such as bus fares, postage, and stationery
(c) Cash deposits into the bank
(d) Credit sales
(e) Trade discounts received
Answer: (b) Small payments such as bus fares, postage, and stationery

40. The imprest system of maintaining Petty Cash means:
(a) The Petty Cashier is given a fixed sum of money at the start of each period
(b) Payments are reimbursed as they occur
(c) Large payments are made through petty cash
(d) Cash and bank transactions are combined
(e) Petty cash is not replenished
Answer: (a) The Petty Cashier is given a fixed sum of money at the start of each period

41. In accounting, which of the following is an adjusting entry?
(a) Opening entries
(b) Closing entries
(c) Rectification of errors
(d) Depreciation adjustments
(e) Purchase returns
Answer: (d) Depreciation adjustments

42. Which of the following does not require a journal entry?
(a) Credit purchase of office furniture
(b) Payment of wages
(c) Closing stock valuation
(d) Discount allowed to customers
(e) Cash sales
Answer: (e) Cash sales

43. Journal entries are required for:
(a) Recording cash sales
(b) Opening entries for the new financial year
(c) Purchases of inventory
(d) Returns of goods sold on credit
(e) Payment of trade payables
Answer: (b) Opening entries for the new financial year

44. Which of the following entries is made to correct an error in the books?
(a) Opening entry
(b) Rectification entry
(c) Closing entry
(d) Transfer entry
(e) Adjustment entry
Answer: (b) Rectification entry

45. Adjusting entries are usually made at the:
(a) Beginning of the financial year
(b) End of the financial year
(c) End of each month
(d) Time of each transaction
(e) Middle of the financial year
Answer: (b) End of the financial year

46. The process of transferring entries from the subsidiary books to the ledger is called:
(a) Posting
(b) Balancing
(c) Journalizing
(d) Reconciling
(e) Closing
Answer: (a) Posting

47. The balance of a cash book is normally:
(a) Debit
(b) Credit
(c) Either debit or credit
(d) Zero
(e) A liability
Answer: (a) Debit

48. If the debit side of a Cash Book is greater than the credit side, it represents:
(a) Profit
(b) A loss
(c) Cash in hand
(d) Bank overdraft
(e) Capital
Answer: (c) Cash in hand

49. If the Bank column of a ThreeColumn Cash Book shows a credit balance, it means:
(a) Cash in hand
(b) Overdraft
(c) Profit
(d) Loss
(e) Closing stock
Answer: (b) Overdraft

50. Which of the following is not part of the double entry system of bookkeeping?
(a) Purchases Book
(b) Sales Book
(c) Cash Book
(d) Profit and Loss Account
(e) Memorandum Book
Answer: (e) Memorandum Book

51. When goods are purchased on credit and returned to the supplier, the entry is recorded in the:
(a) Purchases Returns Book
(b) Sales Returns Book
(c) Purchases Book
(d) Sales Book
(e) Cash Book
Answer: (a) Purchases Returns Book

52. Which subsidiary book is used for recording credit purchases of goods?
(a) Sales Book
(b) Purchases Book
(c) Returns Inward Book
(d) Returns Outward Book
(e) Journal Proper
Answer: (b) Purchases Book

53. The main purpose of a General Ledger is to:
(a) Record cash sales
(b) Summarize all transactions for financial statement preparation
(c) Record small expenses
(d) Record credit sales
(e) Record bank transactions
Answer: (b) Summarize all transactions for financial statement preparation

54. Which type of ledger account is debited when cash is paid?
(a) Cash Account
(b) Purchase Account
(c) Bank Account
(d) Capital Account
(e) Expenses Account
Answer: (e) Expenses Account

55. If the Sales Account is debited, it usually represents:
(a) Sales made on credit
(b) Cash sales
(c) Returns of goods sold
(d) Purchases made on credit
(e) Bank payments
Answer: (c) Returns of goods sold

56. A Trial Balance is prepared to:
(a) Record financial transactions
(b) Identify discrepancies in the ledger accounts
(c) Calculate net profit
(d) Prepare financial statements
(e) Record purchase returns
Answer: (b) Identify discrepancies in the ledger accounts

57. Which of the following is not shown in the Trial Balance?
(a) Cash balance
(b) Sales balance
(c) Discounts allowed
(d) Accrued income
(e) Purchases balance
Answer: (d) Accrued income

58. If the Trial Balance does not tally, the first step in locating the error is to:
(a) Recalculate the balances
(b) Check the cash book entries
(c) Find the difference and divide it by 2
(d) Check the journal entries
(e) Look for missing transactions
Answer: (c) Find the difference and divide it by 2

59. Adjusting entries for expenses incurred but not yet paid are called:
(a) Prepaid expenses
(b) Accrued expenses
(c) Deferred expenses
(d) Outstanding expenses
(e) Capital expenses
Answer: (b) Accrued expenses

60. Depreciation is recorded as an:
(a) Asset
(b) Liability
(c) Expense
(d) Revenue
(e) Gain
Answer: (c) Expense

61. The balance of an expense account is usually:
(a) Debit
(b) Credit
(c) Either debit or credit
(d) Zero
(e) Transferred to capital
Answer: (a) Debit

62. Prepaid expenses are recorded as:
(a) Asset
(b) Liability
(c) Expense
(d) Income
(e) Capital
Answer: (a) Asset

63. The total of the Returns Inward Book is transferred to:
(a) Debit side of Sales Account
(b) Debit side of Purchases Account
(c) Credit side of Sales Account
(d) Credit side of Purchases Account
(e) Debit side of Capital Account
Answer: (a) Debit side of Sales Account

64. Which of the following would not appear on the credit side of a Trial Balance?
(a) Sales Account
(b) Capital Account
(c) Purchases Account
(d) Bank Overdraft
(e) Creditors Account
Answer: (c) Purchases Account

65. The Profit and Loss Account is prepared to:
(a) Record all sales transactions
(b) Calculate the gross profit and net profit of the business
(c) Record cash payments
(d) Record only credit transactions
(e) Prepare the trial balance
Answer: (b) Calculate the gross profit and net profit of the business

66. The Trading Account is used to calculate:
(a) Net profit
(b) Gross profit
(c) Total expenses
(d) Accrued income
(e) Capital employed
Answer: (b) Gross profit

67. If Opening Stock is ₹50,000, Purchases are ₹100,000, and Closing Stock is ₹40,000, what is the Cost of Goods Sold?
(a) ₹110,000
(b) ₹90,000
(c) ₹140,000
(d) ₹150,000
(e) ₹50,000
Answer: (a) ₹110,000

68. The Balance Sheet shows:
(a) Profit and loss for the year
(b) Assets and liabilities at a specific date
(c) Cash inflow and outflow during the year
(d) List of transactions for the year
(e) Adjusting entries
Answer: (b) Assets and liabilities at a specific date

69. In the Balance Sheet, debtors are shown as:
(a) An asset
(b) A liability
(c) Income
(d) Expense
(e) Capital
Answer: (a) An asset

70. Which of the following is not shown on the credit side of the Profit and Loss Account?
(a) Sales
(b) Interest earned
(c) Commission received
(d) Purchase returns
(e) Wages paid
Answer: (e) Wages paid

71. A Bill of Exchange is drawn by:
(a) A creditor
(b) A debtor
(c) A bank
(d) An accountant
(e) An investor
Answer: (a) A creditor

72. The person who accepts the Bill of Exchange is called the:
(a) Drawer
(b) Drawee
(c) Payee
(d) Endorser
(e) Guarantor
Answer: (b) Drawee

73. Which of the following documents is used in case of credit sales?
(a) Cash memo
(b) Bill of exchange
(c) Debit note
(d) Credit note
(e) Invoice
Answer: (e) Invoice

74. The total of Bills Receivable Book is posted to the:
(a) Debit side of Bills Receivable Account
(b) Credit side of Bills Receivable Account
(c) Debit side of Sales Account
(d) Credit side of Purchases Account
(e) Debit side of Cash Account
Answer: (a) Debit side of Bills Receivable Account

75. A Bills Payable Book is a:
(a) Journal
(b) Subsidiary book
(c) Principal book
(d) Ledger
(e) Statement of accounts
Answer: (b) Subsidiary book

76. If a bill is dishonored, the drawer will:
(a) Debit the Bills Receivable Account
(b) Credit the Bills Receivable Account
(c) Debit the Bank Account
(d) Credit the Sales Account
(e) Credit the Purchases Account
Answer: (b) Credit the Bills Receivable Account

77. A promissory note is drawn by the:
(a) Debtor
(b) Creditor
(c) Payee
(d) Drawee
(e) Drawer
Answer: (a) Debtor

78. In the Bills Payable Book, the drawer will record the bill on the:
(a) Debit side of the Bills Payable Account
(b) Credit side of the Bills Payable Account
(c) Credit side of the Sales Account
(d) Debit side of the Bank Account
(e) Credit side of the Purchases Account
Answer: (b) Credit side of the Bills Payable Account

79. The maturity date of a Bill of Exchange is the date on which:
(a) The bill is drawn
(b) The bill is accepted
(c) The payment is due
(d) The bill is dishonored
(e) The bill is sold
Answer: (c) The payment is due

80. Discount allowed is treated as:
(a) An expense
(b) A liability
(c) An asset
(d) Income
(e) Capital
Answer: (a) An expense

81. When goods are sold on credit, the seller issues a:
(a) Bill of exchange
(b) Debit note
(c) Credit note
(d) Invoice
(e) Promissory note
Answer: (d) Invoice

82. The discount recorded in the Cash Book is:
(a) Trade discount
(b) Cash discount
(c) Quantity discount
(d) Seasonal discount
(e) Interest discount
Answer: (b) Cash discount

83. The closing stock is shown in the:
(a) Trial Balance
(b) Profit and Loss Account
(c) Trading Account and Balance Sheet
(d) Cash Book
(e) Purchases Book
Answer: (c) Trading Account and Balance Sheet

84. The cost of goods sold is calculated by:
(a) Subtracting gross profit from total sales
(b) Adding net profit to total sales
(c) Subtracting closing stock from purchases
(d) Adding opening stock and purchases, and subtracting closing stock
(e) Adding sales and closing stock
Answer: (d) Adding opening stock and purchases, and subtracting closing stock

85. If closing stock is understated, it will:
(a) Overstate the gross profit
(b) Understate the gross profit
(c) Overstate sales
(d) Understate purchases
(e) Have no effect on the profit
Answer: (b) Understate the gross profit

86. The goods returned by customers are recorded in:
(a) Purchases Book
(b) Sales Returns Book
(c) Purchases Returns Book
(d) Sales Book
(e) Ledger
Answer: (b) Sales Returns Book

87. The closing balance in the Cash Book represents:
(a) Cash on hand at the end of the period
(b) Total receipts for the year
(c) Total payments for the year
(d) Gross profit
(e) Capital
Answer: (a) Cash on hand at the end of the period

88. The bank reconciliation statement is prepared to:
(a) Correct cash book errors
(b) Match the Cash Book and Bank Statement balances
(c) Adjust for bad debts
(d) Prepare the final accounts
(e) Record credit sales
Answer: (b) Match the Cash Book and Bank Statement balances

89. Outstanding expenses are:
(a) Expenses paid in advance
(b) Expenses due but not yet paid
(c) Expenses that are waived off
(d) Expenses already settled
(e) None of the above
Answer: (b) Expenses due but not yet paid

90. Purchase of fixed assets on credit is recorded in the:
(a) Purchases Book
(b) Journal Proper
(c) Cash Book
(d) Sales Book
(e) Petty Cash Book
Answer: (b) Journal Proper

91. If a wrong amount is posted to a ledger account, the error is corrected by a:
(a) Closing entry
(b) Rectification entry
(c) Transfer entry
(d) Adjustment entry
(e) Journal entry
Answer: (b) Rectification entry

92. A compensating error occurs when:
(a) Two errors cancel each other out
(b) The same entry is made twice
(c) Errors are made in both the Cash Book and the Ledger
(d) Credit purchases are overstated
(e) Discounts are omitted
Answer: (a) Two errors cancel each other out

93. When a journal entry is posted to the wrong account, it is an example of:
(a) Error of principle
(b) Error of commission
(c) Error of omission
(d) Compensating error
(e) Rectification error
Answer: (b) Error of commission

94. Errors of omission are:
(a) Errors in the Cash Book
(b) Errors caused by not recording a transaction
(c) Errors in balancing the trial balance
(d) Errors in posting ledger entries
(e) Errors in calculating profit
Answer: (b) Errors caused by not recording a transaction

95. Which of the following is an error of principle?
(a) Debit entry made instead of credit entry
(b) Capital expense recorded as revenue expense
(c) Entry posted to the wrong ledger account
(d) Invoice not recorded
(e) Total sales miscalculated
Answer: (b) Capital expense recorded as revenue expense

96. If a purchase of ₹5,000 is recorded as ₹500, it is an error of:
(a) Omission
(b) Principle
(c) Commission
(d) Misposting
(e) Original entry
Answer: (e) Original entry

97. If returns inward are overstated, the effect on profit will be:
(a) Overstated
(b) Understated
(c) No effect
(d) Not measurable
(e) Increased revenue
Answer: (b) Understated

98. If sales are recorded in the Purchases Book, this is an error of:
(a) Omission
(b) Principle
(c) Commission
(d) Posting
(e) Misstatement
Answer: (b) Principle

99. A trial balance does not detect:
(a) Errors of omission
(b) Errors of commission
(c) Errors in totaling
(d) Misstatements
(e) Overstatements
Answer: (a) Errors of omission

100. Suspense accounts are used to:
(a) Correct errors in the trial balance
(b) Adjust for bad debts
(c) Record cash sales
(d) Record unpaid expenses
(e) Record transactions on credit
Answer: (a) Correct errors in the trial balance