🏆 Challenge Zone · Chapter 4 · ⏱ 30 min

Challenge Zone: Recording of Transactions – II

Each challenge solved = +25 XP. Solve without a hint = +10 bonus XP. Solve all four to earn the chapter’s Topper badge.

🎯 What you will master here:

Handle contra entries, held cheques and personal withdrawals in one cash book
Find a missing figure in a petty cash book using the imprest system
Reverse both the bank receipt and the discount when a cheque is dishonoured
Track a supplier's account through GST purchases, returns and settlement discount

Welcome to the topper round of Chapter 4! These questions mix two or three ideas at once: which column, which book, what happens to discount, what happens to GST. Read every line slowly and ask “money in or out? cash or bank? goods or asset?” Hints are there if you get stuck, but give each question an honest try first. Crack all four and you can handle any subsidiary-books question in the board exam.

🌍 Where is this used in real life?

Open accounting software such as Tally and you will find the ideas of this chapter as voucher types: Receipt, Payment, Contra, Purchase, Sales, Debit Note, Credit Note and Journal. The software then builds the cash book, bank book, purchase register and sales register (the day books) automatically. Under GST, a registered business reports its sales invoices and the credit notes and debit notes it issues in its GST returns, so the sales book and the sales return book are, in effect, what the tax department sees. When a customer’s cheque bounces, the business reverses the receipt exactly as you learnt; in India, a cheque dishonoured for insufficient funds can also lead to legal action under the Negotiable Instruments Act. And in almost every office, the petty cashier’s float and vouchers are counted during an audit, because small cash is where small frauds hide.

🪄 Accounting magic

A contra entry is like moving money from your left pocket to your right pocket. Cash goes down and bank goes up by the same amount (or the other way round), so the total of cash in hand + cash at bank never changes because of a contra entry. That is why a contra entry is not posted anywhere: nothing outside the cash book was affected. Quick check for any cash book: (closing cash + closing bank) = (opening cash + opening bank) + all non-contra receipts − all non-contra payments.

⭐ Challenge 1 (Level: Tough)

Sharma Traders, April 2026: opening cash ₹8,000, bank ₹25,000. Apr 3 received a cheque from Ravi ₹6,000 (deposited on Apr 6). Apr 4 cash sales ₹14,000. Apr 6 Ravi’s cheque deposited. Apr 10 cash deposited into bank ₹10,000. Apr 15 withdrew ₹4,000 from bank for office use. Apr 18 owner withdrew ₹3,000 from bank for personal use. Apr 22 paid wages in cash ₹5,500. Apr 26 paid a supplier by cheque ₹9,000. What is the cash in hand on 30 April (in ₹)?

Ravi’s cheque enters the cash column on Apr 3 and leaves it on Apr 6. The personal withdrawal never touches the cash column.

Cash column receipts: 8,000 + 6,000 (Ravi, held as cash) + 14,000 + 4,000 (from bank, C) = 32,000. Cash column payments: 6,000 (Ravi’s cheque deposited, C) + 10,000 (deposit, C) + 5,500 (wages) = 21,500. Cash in hand = ₹10,500. (Bank: 25,000 + 6,000 + 10,000 − 4,000 − 3,000 − 9,000 = ₹25,000. Magic-formula check: opening 33,000 + non-contra receipts 20,000 (Ravi 6,000, sales 14,000) − non-contra payments 17,500 (drawings 3,000, wages 5,500, supplier 9,000) = 35,500 = 10,500 + 25,000 ✔)

⭐⭐ Challenge 2 (Level: Tougher)

A petty cashier works on an imprest of ₹5,000 for the month. At the month end the analysis columns show: Postage ₹640, Conveyance ₹1,285, Stationery ₹920, Cartage ₹380. The Miscellaneous column total is smudged and cannot be read. Cash actually counted with the petty cashier is ₹1,165, and all vouchers are in order. What is the total of the Miscellaneous column (in ₹)?

Total spent = imprest − cash in hand. The analysis columns together must equal the total spent.

Total spent = 5,000 − 1,165 = 3,835. Known columns = 640 + 1,285 + 920 + 380 = 3,225. Miscellaneous = 3,835 − 3,225 = ₹610. The reimbursement will be ₹3,835.

⭐⭐ Challenge 3 (Level: Tougher)

Rakesh owed ₹20,000. He gave a cheque of ₹19,600 in full settlement, which was deposited into the bank the same day (discount allowed ₹400). A week later the bank returned the cheque dishonoured. In practice this is split between the cash book and the journal proper; write the total effect of the dishonour as one compound journal entry. (One debit, two credits.)

Undo everything that the settlement did: the bank receipt and the discount. How much does Rakesh owe again?

On settlement we had: Bank Dr. 19,600 and Discount Allowed Dr. 400, Rakesh Cr. 20,000. The dishonour reverses all of it: Rakesh again owes the full ₹20,000 (debit), the bank balance goes down by ₹19,600 (credit, entered in the bank column on the payments side) and the discount of ₹400 is cancelled (credit, passed through the journal proper).

Particulars	Dr (₹)	Cr (₹)
Rakesh’s A/c Dr.	20,000
To Bank A/c		19,600
To Discount Allowed A/c		400
(Being Rakesh’s cheque dishonoured and discount cancelled)

⭐⭐⭐ Challenge 4 (Level: Topper)

Verma Mobile Store, Aligarh (UP), buys from Kanpur Accessories, Kanpur (UP). On 1 April 2026, Kanpur Accessories’ account shows a credit balance of ₹12,000. In April:
Apr 16: Bought 100 chargers @ ₹400 on credit, trade discount 5%, CGST 9% and SGST 9% (recorded in the analytical purchases book).
Apr 19: Returned 10 defective chargers from this lot (debit note issued, GST reversed).
Apr 28: Paid ₹11,760 by cheque in full settlement of the opening balance of ₹12,000.
What is the balance of Kanpur Accessories’ account on 30 April (in ₹)?

Invoice = net price + CGST + SGST. The return uses the same trade discount and GST rates. The settlement clears ₹12,000 (cheque + discount received).

Apr 16 invoice: 40,000 − 5% = 38,000; CGST 3,420 + SGST 3,420; total 44,840 (credited to the supplier).
Apr 19 debit note: 10 × 400 = 4,000 − 5% = 3,800; CGST 342 + SGST 342; total 4,484 (debited to the supplier).
Apr 28: Bank 11,760 + Discount Received 240 = 12,000 (debited).
Balance = 12,000 + 44,840 − 4,484 − 11,760 − 240 = ₹40,356 (credit balance: we owe this amount).

🧠 Think fast

Which of these is NOT a contra entry?

Cash deposited into the bank
Cash withdrawn from the bank for office use
A cheque, first held as cash, deposited into the bank
Cash withdrawn from the bank for the owner’s personal use

Personal withdrawal reduces only the bank column (By Drawings A/c). Business cash does not increase, so it is not cash ↔ bank and not contra.

A furniture dealer buys 10 dining tables on credit from Rana Woodworks to sell in his showroom. This is recorded in the:

Purchases Book
Journal Proper
Cash Book
Purchases Return Book

For a furniture dealer, tables are goods (stock-in-trade), and they are bought on credit. So they go to the purchases book. Only furniture bought for use in the business would go to the journal proper.

📌 What toppers remember

A cheque held before deposit enters and leaves the cash column; personal withdrawals from the bank touch only the bank column.
Contra entries never change the total of cash + bank.
In a petty cash book, total of analysis columns = imprest − cash in hand = reimbursement.
On dishonour, reverse both the bank receipt and any discount allowed; the customer again owes the full amount.
GST returns reverse input tax at the same rate and trade discount as the original purchase.
“Goods” depends on the business: what a business deals in is goods for it.