State whether the following statements are True or False:
Cash received is entered on the debit side of cash book.
True - Cash received (inflow) is always entered on the debit side of cash book.
Journal is a book of secondary entry.
False - Journal is a book of original/primary entry, not secondary entry.
One debit account and more than one credit account in a entry is called compound entry.
True - A compound entry has one debit and more than one credit account (or vice versa).
Assets sold on credit are entered in sales journal.
False - Assets sold on credit are entered in Journal Proper, not sales journal which records only goods.
Cash and credit purchases are entered in purchase journal.
False - Purchase journal records only credit purchases of goods; cash purchases go to cash book.
Cash sales are entered in sales journal.
False - Sales journal records only credit sales; cash sales are entered in cash book.
Cash book records transactions relating to receipts and payments.
True - Cash book records all transactions relating to cash receipts and payments.
Ledger is a subsidiary book.
True - Ledger is classified as a subsidiary book in accounting records.
Petty cash book is a book having record of big payments.
False - Petty cash book records small/petty payments, not big payments.
Transaction recorded both on debit and credit side of cash book is known as contra entry.
True - Contra entry appears on both debit and credit sides of cash book (e.g., cash deposited into bank).
Balancing of account means total of debit and credit side.
False - Balancing means finding the difference between debit and credit sides, not totaling them.
Credit purchase of machine is entered in purchase journal.
False - Credit purchase of machine (asset) is entered in Journal Proper, not purchase journal.
Explanation
These answers are directly verified from the Test Your Understanding - II section of the textbook. Key concepts tested include: distinction between books of original entry (Journal) vs secondary entry, types of subsidiary books and their purposes (sales journal for credit goods only, purchase journal for credit goods only, Journal Proper for assets), cash book rules (debit for receipts, contra entries), and meaning of balancing accounts.