Overview of the discount allowed and discount received. Two double column cash book when discount is allowed on the receipt of cash and discount is received when payment is made to suppliers, it becomes desirable to add discount column along with cash on both sides of the cash book. These have been explained in the pages on discounts. Features of the cash book as both a ledger account and book of original entry 5. Threecolumn cash books and discounts igcse accounts. She offers a cash discount of 3% to her debtors for payment within 15 days. When a trader keeps a bank account it becomes necessary to record the. Double column cash book explained with example tutorstips. It may also be noted that when the discount column are addeded with both sides of the double column cash book, it now becomes a treble or three column cash book.
It is cost and time effective as no separate bank account is required to be maintained. Treblethree column cash book definition, explanation. This discount is frequently an early payment discount on credit sales, but it can also be for other reasons, such as a discount for paying cash up front, or for buying in high volume, or for buying during a promotion period. Since cash discounts are related to receipts and payments of money, an extra column is provided on each side of the cash book for recording discounts.
Dec 17, 2019 the other side of the three column cash ledger book would be headed credit and show an identical format with the three columns representing the monetary amounts of the cash payment, bank payment, and discounts received. Recording transactions in the cash book accounting. The discount column in the cash book is only a memorandum column and does not stand for discount account. A discount allowed is when the seller of goods or services grants a payment discount to a buyer. The only difference between two types of cash book is that a double column cash book has two money columns i. Bank over draft is recorded in the credit side of the cash book in bank column. On the other hand, if debtors pay early, a discount may be allowed to them. The total of discount allowed dr column is then posted to debit of discountdiscount allowed account and the total of discount received cr. The cash columns will be posted in the same way as single column cash book. Mar 02, 2020 if cash is paid early, creditors may allow a discount.
Discount allowed and discount received accountingtools. An example of discount allowed is when a customer is allowed cash discounts. There are certain transactions which concern cash and bank. In many concerns it is customary for the trader to allow or to receive small allowance off or against the dues. In other words, we can say that if we add a bank column to both sides of a single column cash book, it would become a double column cash book. From the following transactions given below you are require to prepare three columnar cash book. The difference between these two is that the 3 column cash book contains an additional amount column on each side. Three column cash book has three columns for amount. Nov 14, 2014 bank over draft is recorded in the credit side of the cash book in bank column. Specimen format of three column cash books is given below. The discount column on the lefthand side of the cash book is for discount allowed to debtors, while the discount column on the right hand side of the cash book is for discount received from suppliers or creditors. Cash discount is recorded, when payments are made in cash or by check. The cash book is prepared in the same way as simple and double column cash books are prepared.
The three column cash book is simply the traditional twocolumn cash book with the addition of an extra column at each side. Cash bok with discount and bank column or three column cash. In modern times, banking habit has become so widespread and is so convenient and safe that a large number of payments of big concerns are made and received through cheques. Apr 03, 2017 if you know what a discount is do you know how to record it. Cash book with discount and cash column transaction. The three column cash book is prepared having three column on each side i. Notes on types of cash book grade 11 principles of.
The difference between these two is that the 3column cash book contains an additional amount column on each side. Three column cash book definition, format and examples. Also called a three column cash book, a triple column cash book has cash, bank and discount allowed on the receipt on the left side and cash, bank and discount received on the payments are on the right side of the cash book. Similarly each item of discount received will be posted to the debit of the respective personal account. In business firm most of the payments are received and paid by cheque. In such cases, the cash book with bank column in addition to the cash and discount columns is found convenient. The following examples explain the use of journal entry for discount allowed in the real world events. One is used to record cash transactions, the second is used to record bank transactions and third is used to record discount received and paid. The illustration below shows the basic format of a threecolumn cash book, which includes the discount columns. Triple column cash book a cash book with discount and bank column is triple column cashbook. This discount is frequently an early payment discount on credit sales, but it can also be for other reasons, such as a discount for paying cash up front, or for buying in high volume, or for buying during a promotion period when goods or. As the cash book represents cash and bank both so the transactions have to be recorded in both the cash and bank columns of the cash book. Cash book three column cash book practice you may also like to read.
Cash discounts result in the reduction of sales revenue earned during the period. The cash book is used instead of the bank account in the ledger, and is written up from the bank payingin book and cheque book stubs. The cash book thus normally consists of a twocolumn with bank and cash discount columns. In triple column cash book 1here are three columns in the cash book because every businessman has a minimum of one current account in the bank. But as regards discount column, each item of discount allowed dr. The discount allowed is entered along with cash received or paid to a party on the same time and on the same side of the book, although in different columns.
Three column cash book questions and answers three column cash book is a book where company maintain the records of cash and bank transactions. Explain the advantages of keeping cash in the bank 3. A double column cash book or two column cash book is one which consists of two separate columns on the debit side as well as credit side for recording cash and discount. The three columns are cash, bank and discount allowed on the debit side on the receipts side while cash, bank and discount received are shown on the credit side i. Mar 23, 2018 example no 1 discount and cash column. The purchases returnsreturns outwards day book example. The double column cash book also known as two column cash book has two money columns on both debit and credit sides one to record cash transactions and one to record bank transactions. Enter the following transactions in the cash book with cash, bank and discount column for a r khan and co. Threecolumn cash books and cash discounts springerlink. Cash bok with discount and bank column or three column.
This extra column is used to record cash discounts. Sohara puts her cash receipts in a till and enters them into her threecolumn cash book each week. Interpret transactions and details in the cash book 12 g 1. Double column cash book explanation, format and examples. Cash book the cash book is a ledger in the sense that it is designed in the form of a cash account and records cash receipts on the debit side and cash payments on the credit side. Two column cash book double column cash book definition. It may be noted that cash and discount are related to each other thats why discount columns are also provided in cash book. Debiting discount allowed ledger has the effect of reducing gross sales revenue by the amount of cash discount allowed. The totals of discount allowed and discount received columns from two sides of cash book are posted in discount allowed ac and discount received ac respectively in the ledger. Consequently, receivables are credited to reduce their balance to the amount that is expected to be recovered from them, i. Thus in three column cash book, three columns for amount are provided on each side. Definition and explanation of cash book with examples. Apr, 2020 in triple column cash book 1here are three columns in the cash book because every businessman has a minimum of one current account in the bank.
Read three column cash book theory related issues and questions. In many concerns it is customary for the trader to allow or to receive small. Double column cash book explanation, format, example. The three column cash book is simply the traditional two column cash book with the addition of an extra column at each side.
The format of the cash book is also unique, in that the accounts for cash and bank stand side by side along with the discount column. If cash is paid early, creditors may allow a discount. We are taking the same example as the single column to understand easily. Bike ltd as part of its sales promotion campaign has offered to sell their. From the following particulars write up a three column cash book of mr. Recording transactions in the cash book accounting simpler. Triplethree column cash book explanation, format, example. In practice cash received and paid is usually recorded in a separate petty cash book. The other side of the three column cash ledger book would be headed credit and show an identical format with the three columns representing the monetary amounts of the cash payment, bank payment, and discounts received. A firm normally keeps the bulk of its funds at a bank. If you know what a discount is do you know how to record it. Oct 04, 2019 double column cash book columns have the following advantages in addition to those of single cash column book it is more convenient as cash and bank accounts are kept side by side at one place. The three column cashbook is sometimes referred to as the triple cash book, treble cash book or the 3 column cash book. Credit the cash book bank column and debit the customers personal account by the amount of the cheque.
Enter the following transactions in the three column cash book and post the same into the ledger. We have just made some of the changes to convert this example into the double column cash book with discount column. Discount allowed and discount received worked example. Where the customer had been allowed a discount, it is cancelled. The procedure of recording transactions in a triplethree column cash book is similar to that of a double column cash book.