Page 51 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes Recording of Transactions in the Double Columns Cash Book
As and when some incentive is offered for prompt payment, discount offered is a loss, hence, it
is shown on the debit side of the Cash Book.
For 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.
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.

Cash Book with Bank and Discount Columns (Three Columns Cash Book)

This type of Cash Book is used by the big business organisations because (i) there are large
number of transactions and (ii) receipts and payments are through cheques. Under this Cash
Book three columns meant for (A) Discount, (B) Cash, and (C) Bank, are shown on both the sides
of the Cash Book. Other columns remain as usual. This Cash Book contains three columns, hence
it is termed as Three Column Cash Book.
Following is the form of Three Columns Cash Book:
Three Columns Cash Book

Date Particulars L.F. Discount Cash Bank Date Particulars L.F. Discount Cash Bank
( ) ( ) ( ) ( ) ( ) ( )

Example: From the following particulars, write up the Cash Book of M/s K.K. of Chennai
with Cash and Bank columns and bring down the final balance.
2009
Oct. 1 Cash in hand 100
Oct. 1 Cash at bank 3,500
Oct. 5 Paid salary by cheque 250
Oct. 7 Paid to K.K. & Co. by cheque 260
Oct. 9 Received a cheque from B & Co. 2,500
Oct. 12 Bought goods for cash paid by cheque 750
Oct. 15 Received cash from M/s. S. Chand 1,500
1,450
Oct. 17 Deposited cash into bank Contd...
Oct. 18 Sundry creditors were paid by cheque 1,250
Oct. 19 Received from debtors by cheque which could not be sent to bank 1,780
LOVELY PROFESSIONAL UNIVERSITY
46 Oct. 20 B & Co. cheque dishonoured 2,500
Oct. 22 B & Co. paid cash 2,500
Oct. 24 R & Co. issued a cheque for Rs. 470 in full satisfaction of his account for 500
Oct. 27 Shyam lal was paid Rs. 395 in full settlement of his A/c amounting to 400
Oct. 31 Deposited into the Bank 2,200