Cashbook

Which of the following statements is correct?

• A drawer or payer is the person who issues a cheque to make payment.

• A payer is the person to whom a cheque is made payable.

• A drawee or payee is the person who issues a cheque to make payment.

• None of the above

Which of the following transactions will give rise to a contra item in the cash book?

• Drawings of cash by the owner for his personal use.

• Drawings of goods by the owner for his personal use.

• Cash banked.

• Injection of new capital by the owner by cheque.

Which of the following books of original entry is part of the double-entry system?

• Cash book

• General journal

• Purchases journal

• Sales journal

A bank overdraft means that

• a firm has more trade payables than trade receivables.

• a firm has more receipts than payments.

• a firm has bought too much inventory.

• a firm has withdrawn more money than it has in its bank account.

Twenty items of goods at $300 each were bought. A trade discount of 5% was given and the business was also entitled to a cash discount of 3% if it settled the invoice within 10 days. If it paid within the cash discount period, the payment amount would be

• $6,000

• $5,820

• $5,700

• $5,529

Cash discounts are allowed to customers to encourage

• cash payment.

• bulk purchase.

• early payment.

• payment on due date.

When the cash at bank balance in the cash book shows a credit balance, this means

• we have enough cash at bank for the accounting period.

• our bank owes us money.

• we need more money in the bank account.

• we have withdrawn more money than we have in our bank account.

A business had a bank balance of $8,100. It paid for goods invoiced at $4,200, less a trade discount of 10% and a cash discount of 15%. A cheque for $2,450 was received on an account receivable. What is the closing bank balance?

• $6,770

• $7,337

• $4,887

• $6,350

Which of the following books of original entry are used to record credit purchases and cash purchases, respectively?

• Purchases ledger; general ledger

• Purchases journal; accounts payable ledger

• Purchases journal; cash book

• General ledger; accounts payable ledger