Which of the following statement is correct?

(A) When a firm maintains a cash book, it need not to maintain Bank and cash account in the ledger.

(B) Goods purchased on cash are recorded in the Purchases (journal) book.

(C) The periodic total of sales return journal is posted to Sales return account.

(D) Assets sold on credit are entered in sales book.

(E) The amount paid to the petty cashier at the beginning of a period is known as imprest amount.

Choose the correct answer from the options given below.

(A), (C), (E) only

The correct answer is option 3- (A), (C), (E) only.

(A) When a firm maintains a cash book, it need not to maintain Bank and cash account in the ledger- THIS IS CORRECT. Cash book is a book in which all transactions relating to cash receipts and cash payments are recorded. It starts with the cash or bank balances at the beginning of the period. Generally, it is made on monthly basis. This is a very popular book and is maintained by all organisations, big or small, profit or not-for-profit. It serves the purpose of both journal as well as the ledger (cash) account. It is also called the book of original entry. When a cashbook is maintained, transactions of cash are not recorded in the journal, and no separate account for cash or bank is required in the ledger.

(B) Goods purchased on cash are recorded in the Purchases (journal) book- THIS IS INCORRECT. Goods purchased on cash are recorded in the cash book as it is a cash transaction.

(C) The periodic total of sales return journal is posted to Sales return account- THIS IS CORRECT.  Sales Return (Return Inwards) Book is used to record return of goods by customers to them on credit. On receipt of goods from the customer, a credit note is prepared. Posting to the sales return journal requires that the customer’s account be credited with the amount of returns and the sales return account be debited with the periodical total.

(D) Assets sold on credit are entered in sales book- THIS IS INCORRECT. Assets sold are not goods sold so they are recorded in journal proper.

(E) The amount paid to the petty cashier at the beginning of a period is known as imprest amount- THIS IS CORRECT. The petty cashier works on the Imprest system. Under this system, a definite sum, say 2,000 is given to the petty cashier at the beginning of a certain period. This amount is called imprest amount. The petty cashier goes on making all small payments out of this imprest amount and when he has spent the substantial portion of the imprest amount say 1,780, he gets reimbursement of the amount spent from the head cashier. Thus, he again has the full imprest amount in the beginning of the next period. The reimbursement may be made on a weekly, fortnightly or monthly basis, depending on the frequency of small payments. (In certain cases, the petty cash system is operated through the main cash book itself. In such instances, the petty cash book is not maintained independently.)