O Level Accounting (7707)•7707/11/M/J/20

Explanation
Two-Column Cash Book as a Book of Prime Entry
Steps:
- Recall that a cash book records cash and bank transactions in a business.
- Note the two-column version has separate columns for cash and bank to track both.
- Identify its role: it serves as both a journal for initial entries and a ledger for these accounts.
- Confirm it qualifies as a book of prime entry, where transactions are first recorded before posting to the ledger.
Why C is correct:
- A two-column cash book is a book of prime entry, as defined in accounting, because it initially records all cash and bank transactions before they are posted to the general ledger.
Why the others are wrong:
- A: It records both cash and bank transactions, not bank only.
- B: It records both cash and bank transactions, not cash only.
- D: It records cash and bank transactions, not cash discounts, which are handled in journals or allowance accounts.
Final answer: C
Topic: Books of prime entry
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