This page enable you understand Questions-Answer of Special Purpose Book -Higher Order Thinking Skills
Higher Order Thinking Skills (HOTS) Questions
Q. 1. Purchases Book is a record prepared from the invoices received from suppliers. Is it correct? Give reasons.
Ans. Yes. Purchases can be either in cash or on credit. Credit purchases are recorded in the Purchases Book. The source documents for recording entries in the Purchases Book are invoices or bills received from the suppliers of goods. The entries are made with the net amount of the invoice after deducting trade discount.
Q. 2. The total of the purchase invoices recorded in the Purchases Book is posted to the debit side of the Purchases Account in the Ledger and credited to the accounts of suppliers. Do you agree? Give reasons.
Ans. Yes. Purchase is a nominal account therefore, following the rule ‘Debit all expenses and losses, Credit all incomes and gains’ the Purchases Account is debited. Since, the Purchases Book contains records of credit purchases, the Suppliers Account should be credited following the rule applicable to personal accounts, i.e., ‘Debit the receiver and Credit the giver’.
Q. 3. Do you agree that a Sales Book is used to record invoices issued to customers in respect of goods sold on credit and not cash? Give reasons.
Ans. Yes. Sales can be either in cash or on credit. Credit sales are recorded in the Sales Book and cash sales in the Cash Book. The source documents for recording entries in the Sales Book are invoice or bill issued to customers. The entries are made with the net amount of the invoice after deducting trade discount.
Special Purpose Books [Purchase, Sales, Bills, Journal]
Q. 4. The total of the Sales Book is posted to the credit side of the Sales Account in the General Ledger while the individual account of customers is debited by the amount of their respective purchases. Is the above statement correct? Give reasons.
Ans. Yes. Sale is a nominal account and, therefore, following the rule ‘Debit all expenses and losses, Credit all incomes and gains’ the Sales Account is credited. Since, the Sales Book contains records of credit sales, the Purchasers’ Account should be debited following the rule applicable to Personal Accounts, i.e., ‘Debit the receiver and Credit the give’.
Q. 5. A firm purchased goods from M/S. R.K. & Co. Because the goods received were not as per order, the firm intended to return the goods. M/S. R.K. & Co. offered a discount of ₹ 5,000 if the firm retained the goods. The firm accepted the offer and M/S. R.K. & Co. sent a credit note for the amount. In your opinion, what entry should be recorded by M/s. R.K. & Co. and why?
Ans. M/S. R.R. & Co. has allowed a discount of 5,000 because the goods supplied were not as per the order. Therefore, the amount of ₹ 5,000 should be debited to M/S. R.K. & Co. and credited to the Purchases Account.
Q. 6. The data entered in the Return Outwards Book comes from credit notes received from suppliers and the total is posted to the credit side of the Return Outwards Account in the General Ledger. In your opinion, is the above statement correct? Give reasons.
Ans. Yes, the goods returned are credited to the Return Outwards Account and are deducted from the Purchases Account at the year end. The Return Outwards Account is a nominal account, therefore, the rule ‘Debit all expenses and losses, credit all incomes and gains’ applies and since the goods have been returned, the account is credited.
Q. 7. A wholesaler sold 55 items to a retailer at a price of ₹ 200 each, less 20% Trade Discount. The retailer subsequently returned 12 of these items. As a result of this, the retailer should be sent a credit note for how much amount?
Ans. The wholesaler should send a credit note for ₹ 1,920 to the retailer, being the amount of 12 items @ 200 and allowing 20% Trade Discount.
Very Short Answer Type Questions
Q. 1. What is a Purchases Book?
Ans. Purchases Book is a subsidiary book in which credit purchases of goods dealt in or stores and raw material used for production are recorded.
Q. 2. Define a Sales Book.
Ans. Sales Book is a subsidiary book in which credit sales of goods dealt in are recorded.
Q. 3. What is meant by a Journal Proper?
Ans. Journal Proper is a book of account in which those transactions and events are recorded which are not recorded in the subsidiary books.
Q. 4. What is a Purchases Return Book?
Ans. Purchases Return Book is a subsidiary book in which the return of goods purchased on credit is recorded.
Q. 5. Give specimen of Purchases Return Book.
Ans. See #
Q. 6. What is meant by a Sales Return Book?
Ans. Sales Return Book is a subsidiary book in which the return of goods sold on credit is recorded.
Q. 7. For what purposes is a Journal Proper used?
Ans. Journal Proper is a residuary book which is used for recording those transactions which are not recorded in any of the other books of original entry.
Q. 8. Give two examples of entries which appear in a ‘Journal Proper’.
Ans. Credit purchase of plant and machinery, Credit sales of fixed assets.
Q. 9. What is an opening entry?
Ans. Opening entry is the entry made in the beginning of a financial year to open the books by debiting assets and crediting liabilities and capital, appearing in the Balance Sheet of the previous year.
Q. 10. What is Bills Receivable Book?
Ans. Bills Receivable Book is a subsidiary book in which the bills drawn by the firm on its debtors are recorded after their acceptance.
Q. 11. State with reason whether the following statements are ‘True’ or ‘False’:
(i) Sales Book is a part of the Ledger.
(ii) Sales Return Book records return of goods sold.
(iii) In Purchases Book, the record is in respect of cash purchases of goods.
(iv) Total of the Sales Book is posted to the credit of the Sales Account.
Ans. (i) False: Sales Book is a book of original entries.
(ii) True: Goods returned by customers are recorded in Sales Return Book.
(iii) False: Only credit purchases of goods are recorded in Purchases Book.
(iv) True: Total of the Sales Book is posted to the Credit of the Sales Account in Ledger periodically.
Q. 12. Mention the subsidiary books in which the following transactions are recorded along with reason thereof:
(i) Purchase of furniture on credit for use in shop. (Delhi 2009)
(ii) Sale of goods on credit.
(iii) Goods returned by Debtors.
(iv) Purchase of stock on credit.
(v) Providing for interest on capital to proprietor.
(vi) Goods returned to creditors.
(vii) Bill accepted by proprietor from creditor.
(viii) Sale of goods for cash.
Ans.
(i) Journal Proper: Because purchase of fixed assets on credit is recorded in Journal Proper.
(ii) Sales Book: Because Sales Book records only credit sales of goods.
(iii) Sales Return Book: Because goods returned by customer are recorded in Sales Return Book.
(iv) Purchases Book: Because Purchases Book records only Credit Purchases of goods.
(v) Journal Proper: Because Journal Proper records all those transactions which could not be recorded in any of the other subsidiary books. Interest on proprietor’s capital is also one of those items which can only be recorded in Journal Proper.
(vi) Purchases Return Book: Because it records only goods returned by the firm to its suppliers.
(vii) Bills Payable Book: Because this book records those bills drawn by others and accepted by firm.
(viii) Cash Book: Because Cash Book records all cash receipts and cash payments.
Q. 13. Name the books of original entry where the following transactions will be recorded with reasons thereof: (Delhi 2011)
(i) Goods purchased from Ram Lal for ₹ 5,000 on credit.
(ii) Provision for doubtful debts created @ 5% on debtors with books value of ₹ 10,000.
(iii) Defective goods sold to Babita on credit worth ₹ 4,000 were returned by her.
(iv) Purchased furniture on credit from Mr. Ratan Singh for 15,000 for use in the business.
Ans.
(i) Purchase Book because it is credit purchase of goods for sale.
(ii) Journal Proper because it will not be recorded any other subsidiary books.
(iii) Sales Return Book because it is return to goods sold in credit.
(iv) Journal Proper because it will not be recorded in other subsidiary books.
Objective Type Questions
1. Select the correct alternative:
(i) In the Purchases Book the record is in respect of
- (a) cash purchases of goods.
- (b) credit purchases of goods dealt in.
- (c) all purchases of goods.
(ii) The Sales Return Book records
- (a) the return of goods purchased.
- (b) return of goods sold.
- (c) return of anything sold.
(iii) The Sales Book
- (a) is a part of the Journal.
- (b) is a part of the Ledger.
- (c) is a part of the Balance Sheet.
(iv) The weekly or monthly total of the Purchases Book is
- (a) posted to the debit of the Purchases Account.
- (b) posted to the debit of the Sales Account.
- (c) posted to the credit of the Purchases Account.
(v) The total of the Sales Book is posted to
- (a) the credit of the Sales Account.
- (b) credit of the Purchases Account.
- (c) credit of the Capital Account.
(vi) The periodic total of Sales Return Journal is posted to the
- (a) Sales Account.
- (b) Goods Account.
- (c) Sales Return Account.
(vii) Goods purchased for cash are recorded in the
- (a) Purchases (Journal) Book.
- (b) Cash Book.
- (c) Purchases Return (Journal) Book.
Ans.: (i) (b); (ii) (b); (iii) (a); (iv) (a); (v) (a); (vi) (c); (vii) (b).
State whether the following statements are True or False:
(i) The Sales Journal is used for recording cash as well as credit sales.
(ii) The Journal Proper records purchase and sale of assets on credit.
(iii) Adjustment entries are passed at the end of the accounting period.
(iv) Closing entries are used for closing of accounts relating to expenses and revenues.
(v) The Journal Proper is used for making an original record of those transactions which do not find a place in any other Journal.
(vi) The Sales Return Book has a debit balance.
(vii) The Purchases Return Book has a debit balance.
Ans.: (i) False; (ii) True; (iii) True; (iv) True; (v) True; (vi) True; (vii) False.
Fill in the blanks with appropriate words:
(i) Purchases Book always shows __________________ balance.
(ii) Sales Book has__________________________balance.
(iii) Journal Proper records transactions of the nature for which___________________Journal is not maintained.
(iv) Sales Book is prepared from the_____________ invoice.
(v) Closing entries are passed at the_________________of the accounting period.
(vi) Adjustment entry affects either the Trading Account or the Profit and Loss Account but definitely the_________ .
(vii) In Journal Proper, only________________Discount is recorded.
Ans.: (i) debit; (ii) credit; (iii) special; (iv) sales; (v) end; (vi) Balance Sheet; (vii) cash.