Page 101 - DMGT104_FINANCIAL_ACCOUNTING

Unit 6: Subsidiary Books

time. So he is offered 10 as discount and he makes the payment of 990 to the firm. The Notes
following entry is required to be passed in the Journal if no Cash Book is used in the books of
M/s Goyal Traders.
Dr. Cr.
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
such items are to be recorded on the credit side of the Cash Book, i.e., amount received or paid
in the Amount/Cash column and discount allowed/received in the discount column.

Posting the Two Column Cash Book

The entries in the cash columns of Two Column Cash Book are posted to the ledger accounts in
the same way as we did in the case of single column cash book. The entries in the discount
columns are also to be posted to the respective personal accounts. The entries in discount allowed
column will be posted to the credit side of the respective personal accounts by writing ‘By
Discount Allowed A/c’. Similarly, the entries in the discount received column will be posted to
the debit side of the respective personal accounts by writing ‘To Discount Received A/c’.

Example: Cash received from Devi Traders 490 and discount allowed 10: This
transaction will be entered in particulars column on the debit side of the cash book by writing
‘To Devi Traders A/c’. An amount of 10 will be shown in discount allowed column and 490
in cash column. Its posting into Devi Traders’ Account in the ledger will be made as follows:
Devi Traders Account
Dr. Cr
( )
By Cash A/c 490
By Discount Allowed A/c 10

As for the transactions relating to cash, the double entry is complete as soon as postings have
been made to the respective personal accounts. But it is not so for the discount aspect. The cash
book does not serve the purpose of discount account. We have to open ‘Discount Allowed
Account’ and ‘Discount Received Account’ in the ledger. The total of discount allowed columns
on the debit side of the cash book is posted to the debit side of the ‘Discount Allowed Account’
in the ledger by writing ‘To Sundries’. Similarly, the total of discount received column on the
credit side of the cash book is posted to the credit side of the ‘Discount Received Account’ in the
ledger by writing ‘By Sundries’. This will complete the double entry in respect of discount
allowed and discount received.

Notes The postings in the two discount accounts are made only for the totals and not for
the individual transactions. Thus we save time and labour.

LOVELY PROFESSIONAL UNIVERSITY 95