Page 104 - DCOM101_FINANCIAL_ACCOUNTING_I

Financial Accounting-I

Notes Dr Pro forma of Double columnar Cash Book Cr

Date Receipts L.F. Bank Cash Date Payments L.F. Bank Cash
To Balance B/d By Balance c/d*
Jan 5 To Bank C1 10,000 Jan 5 By cash C1 10,000
Jan20 To Cash C2 5,000 Jan20 By Bank C2 5,000
By Balance B/d

* Bank overdraft
The above table of double columnar cash book clearly elucidates the contra entry process taking
place between the two entities, viz firm and bank.

9.3 Three Column Cash Book

It is another dimension of cash book which has three components of operations of the enterprise
viz cash, bank and discount. This cash book is an extension of the early one, not only allows and
incorporates the receipts and payments of the firm through cash and bank, but also discount

allowed and received.
Proforma of Three Columnar Cash Book

Date Receipts L.F. Bank Cash Discount Date Payments L.F. Bank Cash Discount
Allowed Received
To Balance B/d By Balance c/d*

By Balance B/d

?

Did u know? Why is discount allowed brought under the debit side?
The discount is allowed at the time of receipts out of sale. The discounts are categorized
into two categories, viz cash discount and trade discount.

Cash discount is the discount allowed by the firm, only at the moment of making the
payment within the stipulated time frame. 7% @ 10 days means that 7% discount will
be given to the parties who are able to make the payment of dues within 10 days of the
stipulated time period.

Example: Roop owes ` 1000 to M/s. Goyal Traders of Muzaffar Nagar. The firm offers a
discount of 1% if payment is made within one month. Roop makes the payment within stipulated
time. So he is offered ` 10 as discount and he makes the payment of ` 990 to the firm. The following

entry is required to be passed in the Journal if no Cash Book is used in the books of M/s. Goyal
Traders.
Date Particulars L.F. ` `
Cash A/c Dr. 990
Discount A/c Dr. 10
To Roop 1000
Cash received and discount allowed.
If Cash Book is used, then both the accounts namely cash and discount are to be recorded on the
debit side of the Cash Book. Similarly, if discount is received for making prompt payment then

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