Recording of Transactions 2

The Cash Book is a Book of Original Entry (Journal) because transactions involving cash and bank are recorded directly into it for the first time from source documents with chronological details. It is simultaneously a Principal Book (Ledger) because it takes the form of a ledger account with Debit and Credit sides, and the balance of the Cash Book directly serves as the cash and bank balance for the Trial Balance, eliminating the need to maintain separate Cash and Bank accounts in the ledger.

A Contra Entry is an entry that affects both the Cash column and the Bank column in the same Two-Column Cash Book simultaneously. It is denoted by writing C in the Ledger Folio (L.F.) column.
Examples:
1. Cash deposited into Bank (₹10,000): Enter ₹10,000 on Debit side in Bank column (write To Cash A/c); enter ₹10,000 on Credit side in Cash column (write By Bank A/c).
2. Cash withdrawn from Bank for office use (₹5,000): Enter ₹5,000 on Debit side in Cash column (write To Bank A/c); enter ₹5,000 on Credit side in Bank column (write By Cash A/c).

• (a) Not recorded: Cash purchases of goods are recorded in the Cash Book, not the Purchases Book.
• (b) Not recorded: Purchase of an office computer (a fixed asset) on credit is recorded in the Journal Proper, not the Purchases Book.
• (c) RECORDED: The Purchases Book exclusively records credit purchases of goods (trade merchandise).

Under the Imprest System, the petty cashier is provided a predetermined fixed cash float (the imprest). At the end of the period, after verifying expense vouchers, the head cashier reimburses the exact total amount spent, restoring the petty cashier's balance back to the original imprest amount.
Reimbursement: The head cashier will reimburse exactly ₹4,850 (the total expenses incurred), restoring the available petty cash balance back to the original ₹6,000.

1. Opening Entries: Recording initial balances of assets, liabilities, and capital at the start of a new financial year.
   2. Closing Entries: Transferring balances of nominal accounts (revenue and expense) to Trading and Profit & Loss Account at year-end.
   3. Rectification Entries: Correcting accounting errors discovered in journals or ledgers.
   4. Credit Purchase/Sale of Fixed Assets: Purchasing or selling plant, machinery, or furniture on credit.

• Personal Account: A debit balance indicates that the person or firm owes money to the business; they are a Debtor (Trade Receivable / Asset).
• Real Account: A debit balance indicates the cost or value of physical property/assets currently owned by the business (e.g., Cash, Machinery, Building). Real accounts can never have a credit balance because a business cannot possess negative physical assets.

A contra entry requires that the transaction simultaneously affects the Cash column and Bank column of the business. When an owner withdraws money from the bank for personal use, it affects the Bank Account and the Drawings Account. Since Drawings is a personal account posted to the ledger (reducing capital) and does not involve cash entering the business till, it is recorded only once on the Credit side (Bank column) and is NOT a contra entry.