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Unit 3: Sub-division of Journals




                                                                                                Notes

             Notes

             1.  Cheque issued on June 10 to a creditor is not recorded in the Cash Book.
             2.  Goods purchased from Arun on June 11 is also not recorded as per rule no credit
                 transaction is recorded.

             3.  Similarly goods sold to Amit on credit is also not recorded.
             4.  Cheque received from a debtor is recorded treating it as cash received as it is banked
                 immediately.

          Cash Book with Discount Columns (also known as Two Columns Cash Book)

          As the name suggests this Cash Book contains two additional columns for amounts i.e. (i) for
          cash receipts or payments, (ii) Discount allowed or received.
          The discount is an incentive given or received for prompt payment. To record discount, one
          additional column on both the sides of the Cash Book is added. The Cash Book is termed as Cash
          Book with discount column because of recording of discount.




             Notes Discount is of two types:
             1.  Trade Discount: It is given for increasing the volume of sales and it is adjusted in the
                 invoice, hence no entry is passed in the books of the business, as it is always deducted
                 from the catalogue price. It is usually allowed by a whole seller to a retailer.
                 For example, if the printed price of a book is   200 and 10% is offered as a  trade
                 discount, then it is  20/- and the net price would be   180/- i.e., (  200 –  20)
                 accordingly entries are to be made by the seller as well as the buyer for  180 in their
                 books.
             2.  Cash Discount: It is given for prompt payment, hence, it is recorded in the Cash
                 Book. When discount is given for prompt payment, it is a loss, hence, it is to be
                 shown on the debit side of the Cash Book whereas discount received is to expedite
                 payment to the outsiders, hence, it is shown on the credit side of the Cash Book.
             No balance of discount columns is taken, simply the total of both the sides is given.

          The following is the form of Double Columns Cash Book.
                                     Double  Columns Cash Book
            Dr.                                                                   Cr.
            Date   Receipts   L.F.   Discount   Cash  Date   Payment   L.F.   Discount   Cash
                                    ( )     ( )                           ( )     ( )












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