Question

The debit balance, at the end of a year, in a cash book, shows:
1. Total Cash paid during the year
2. Total cash received during the year
3. Income of the business entity
4. Cash in hand at the end of the given period

Answer 1

Correct Answer - Option 4 : Cash in hand at the end of the given period

The debit balance, at the end of a year, in a cash book, shows Cash in hand at the end of the given period.

1. Cashbook is a book of original entries in which transactions relating only to cash receipts and payments are recorded in detail.
2. When cash is received it is entered on the debit or left-hand side. Similarly, when cash is paid out the same is recorded on the credit or right-hand side of the cash book.
3. The debit balance as per the cash book means the balance of deposits held at the bank. Such a balance will be a credit balance as per the passbook. Such a balance exists when the deposits made by the firm are more than its withdrawals, which simply means Cash in hand at the end of the given period.

• Balancing Cash Book:
  • The cash book is balanced at the end of a given period by inserting the excess of the debit on the credit side as "by balance carried down" to make both sides agree.
  • The balance is then shown on the debit side by "To balance brought down" to start the next period. As one cannot pay more than what he actually receives, the cash book recording cash only can never show a credit balance.