Cashbook is an important record that shows all cash received and paid by a business. In Interviews, important cash book questions usually cover the types, format, and differences between a cash book and a ledger. You may also be asked about handling bank transactions, discounts, and mistakes. Knowing all these basics shows that you understand practical accounting.
Cash Book Interview Questions and Answers
1. What is a Cash book?
A cash book is a book of original entry used to record all cash and bank transactions of a business. It records cash receipts on the debit side and cash payments on the credit side. It helps determine the business’s daily cash position.
2. Why is a cash book prepared?
A cash book is prepared to maintain an accurate record of cash and bank transactions. It will help businesses to know about the availability of cash at any time. It also avoids the misuse of cash.
3. Is a cash book a journal or a ledger?
A Cash book performs the functions of both a journal and a ledger. Transactions are recorded directly in the cash book without passing through the journal. Hence, a separate cash account in the ledger is not necessary.
4. What type of transactions are recorded in a cash book?
Only cash transactions and bank transactions are recorded in the cash book. Credit transactions are not included in it. This helps in keeping the cash records clear and accurate.
5. What are the main types of cash book?
The main types of cash books are single-column, double-column, triple-column cash books, and petty cash books. Each type is used based on the requirements of the business. Larger businesses usually maintain more detailed cash books.
6. What is a single-column cash book?
A single-column cash book contains only one amount column for cash. It records only cash receipts and cash payments. This type of cash book is suitable for small businesses with limited transactions.
7. What is a double-column cash book?
A double-column cash book contains two amount columns. It generally records cash and bank transactions or cash and discount transactions. It provides more detailed information compared to a single-column cash book.
8. What is a triple-column cash book?
A triple-column cash book contains three amount columns for cash, bank, and discount. It records all cash receipts, bank transactions, and discounts in one book. It is commonly used by large organizations.
9. What is the cash column in a cash book?
The cash column shows all cash receipts and cash payments. It helps in knowing the exact cash balance available. The cash column always shows a debit balance or a zero balance.
10. What is the bank column in a cash book?
The bank column records all transactions related to bank deposits and withdrawals. It shows the bank balance at any point in time. The bank column can show either a debit balance or an overdraft.
11. What is the discount column in a cash book?
The discount column records cash discounts allowed and cash discounts received. It does not show any balance. The totals are posted to the respective discount accounts in the ledger.
12. Can a cash book show a credit balance?
A cash book cannot show a credit balance in the cash column. This is because payments cannot exceed the available cash. Therefore, the cash balance is always a debit or zero.
13. Why does the cash book never show a credit balance?
The cash book never shows a credit balance because a business cannot pay more cash than it has. Cash payments are made only if cash is available. Hence, a negative cash balance is not possible.
14. What is a cash discount?
A cash discount is a reduction in price allowed for making prompt payment. It encourages customers to pay early. Cash discounts are recorded in the cash book.
15. Where is the discount allowed recorded?
The discount allowed is recorded on the debit side of the cash book. It represents an expense to the business. It is later posted to the discount allowed account.
16. Where is the discount received recorded?
The discount received is recorded on the Credit side of the cash book. It represents an income for the business. It is later posted to the discount received account.
17. What is a contra entry?
A contra entry is an entry where both debit and credit aspects affect cash and bank accounts. It occurs when cash is deposited into or withdrawn from the bank. Such entries are recorded on both sides of the cash book.
18. Give an example of a contra entry?
When cash is deposited into the bank, cash decreases, and the bank balance increases. Both aspects are recorded in the cash book. This transaction is treated as a contra entry.
19. How are contra entries identified in the cash book?
Contra entries are marked with the letter “C” in the ledger folio column. This marking indicates that posting to the ledger is not required. It helps in easily identifying such entries.
20. Are contra entries posted to the ledger?
Contra entries are not posted to the ledger. Since both aspects are already recorded in the cash book, no separate ledger posting is needed. This avoids duplication of entries.
21. What is petty cash?
Petty cash is a small amount of money kept for meeting minor daily expenses. These expenses include postage, stationery, and small conveyance charges. It helps reduce the workload on the main cash book.
22. What is the imprest system of petty cash?
Under the imprest system, a fixed amount is given to the petty cashier. At the end of a period, the petty cashier is reimbursed for expenses incurred. This system ensures better control over petty expenses.
23. Is the cash book balanced?
Yes, the cash book is balanced periodically. Balancing helps in knowing the closing cash and bank balance. It ensures accuracy in cash records.
24. How is a cash book balanced?
The totals of both sides of the cash book are calculated. The difference between total receipts and total payments is found. This difference represents the closing balance.
25. What does the balance of a cash book represent?
The balance of the cash book represents cash in hand or bank balance. It shows the financial position related to cash. This balance is carried forward to the next period.
26. Can credit transactions be recorded in the cash book?
Credit transactions are not recorded in the cash book. Only cash and bank transactions are entered. Credit transactions are recorded in other subsidiary books.
27. Where is the opening balance shown in the cash book?
The opening balance is shown on the debit side of the cash book. It represents cash or bank balance brought forward. It is the starting point of the accounting period.
28. Where is the closing balance shown in the cash book?
The closing balance is shown on the credit side as “Balance c/d”. It is then brought down to the next period. This shows continuity in accounting records.
29. What is a bank overdraft?
A bank overdraft occurs when withdrawals exceed deposits in the bank. It results in a credit balance in the bank column. It indicates a liability to the bank.
30. Can the cash column show an overdraft?
The cash column cannot show an overdraft. Cash payments cannot exceed available cash. Therefore, only the bank column can show overdraft.
31. How is a bank overdraft recorded in the cash book?
Bank overdraft is shown as a credit balance in the bank column. It is recorded on the credit side. This helps in knowing the excess amount withdrawn.
32. What is a cheque received?
A cheque received is treated as cash when received. It is recorded on the debit side of the cash book. Once deposited, it affects the bank column.
33. When is a cheque considered as a bank balance?
A cheque is considered a bank balance when it is deposited into the bank. Until then, it is treated as cash. This distinction is important for correct recording.
34. How is dishonour of a cheque recorded?
When a cheque is dishonoured, the earlier entry is reversed. The bank balance is reduced accordingly. This ensures accuracy in records.
35. What are cash sales?
Cash sales are sales made for immediate cash payment. They increase the cash balance. Such sales are recorded on the debit side of the cash book.
36. Where are cash sales recorded?
Cash sales are recorded on the debit side of the cash book. They represent cash inflow. This helps in tracking daily sales receipts.
37. What are cash purchases?
Cash purchases are purchases paid immediately in cash. They reduce the cash balance. These transactions are common in day-to-day business.
38. Where are cash purchases recorded?
Cash purchases are recorded on the credit side of the cash book. They represent cash outflow. Proper recording helps in expense control.
39. Is the cash book part of the final accounts?
The cash book is not part of the final accounts. It is a book of original entries. However, its balances are used in preparing final accounts.
40. What is posting in relation to the cash book?
Posting means transferring entries from the cash book to ledger accounts. Only non-cash accounts are posted. Cash and bank balances remain in the cash book.
41. Which side of the cash book is posted to the ledger?
The opposite aspect of the transaction is posted to the ledger. For example, cash received from a debtor is posted to the debtor’s account. This completes double entry.
42. What is the balancing of the cash book?
Balancing is the process of totaling both sides of the cash book. It helps find the closing balance. It ensures arithmetic accuracy.
43. Can errors occur in the cash book?
Yes, errors can occur due to wrong entries or omissions. Human mistakes are possible. These errors must be corrected through rectification.
44. How are cash book errors rectified?
Cash book errors are rectified by passing rectification entries. Corrections depend on the nature of the error. Proper correction ensures reliable accounts.
45. Is maintaining a cash book compulsory?
Maintaining a cash book is essential for every business dealing with cash. It ensures transparency and accountability. It also helps during audits.
46. What is the receipt side of a cash book?
The debit side of the cash book is called the receipt side. It records all cash and bank inflows. It shows sources of cash.
47. What is the payment side of a cash book?
The credit side of the cash book is called the payment side. It records all cash and bank outflows. It shows how cash is spent.
48. What is narration in a cash book?
Narration is a brief explanation of the transaction. It helps understand the nature of the entry. Proper narration improves clarity.
49. Why is a cash book important?
A cash book helps in controlling cash transactions. It prevents misuse of funds and fraud. It also supports accurate financial reporting.
50. What is the main objective of preparing a cash book?
The main objective is to record all cash and bank transactions accurately. It helps in knowing the cash position at all times. It also ensures proper financial control.
Conclusion
Being prepared with important cash book questions shows that you can handle cash transactions carefully. When you can clearly explain the types of cash books, how entries are recorded, and how errors are corrected, it shows your attention to detail and a clear understanding of basic accounting concepts. A good knowledge of the Cash Book helps employers trust your ability to maintain accurate financial records and manage cash properly. Practicing these questions before the interviews improves your confidence and increases your chances of getting selected. If you feel weak in this area, joining Finprov can help you build strong basics and perform better in interviews. With proper accounting training, you not only understand concepts clearly but also learn how to apply them in real-life situations.
