Answer:
1. A cash book is a financial ledger that records all cash transactions, including inflows and outflows, in an organization. There are four main types of cash books:
- Single Column Cash Book: Records only cash transactions, with a single column for cash receipts and payments.
- Double Column Cash Book: Contains two columns for cash receipts and payments, as well as additional columns for discount, cash discount, and bank transactions.
- Triple Column Cash Book: Includes columns for cash, bank, and discount transactions.
- Petty Cash Book: Maintains a record of small, routine expenses paid in cash, helping to track these transactions separately from the main cash book.
2. A contra entry is a transaction that involves both cash and bank accounts of the same entity. In a double column cash book, contra entries are recorded in the center columns, where both cash and bank transactions are recorded side by side. For example, when cash is deposited into the bank or withdrawn from it, a contra entry is created to reflect the movement in both the cash and bank accounts.
3. A petty cash book is a subsidiary book used to record small, day-to-day cash transactions that are not suitable for inclusion in the main cash book. Advantages of maintaining a petty cash book include:
- Efficient Tracking: Helps keep a clear record of small expenses, making it easier to manage and track.
- Control: Prevents the need to include minor expenses in the main cash book, simplifying reconciliation and control procedures.
- Accountability: Assigns responsibility for managing petty cash and ensures transparency in handling these transactions.
- Reduced Workload: Enables efficient handling of routine expenses, saving time and effort in the main cash book maintenance.