To differentiate contra entries from other entries, letter “C” is printed in the posting reference column (on both the debit and credit sides of the cash book). Bank charges are recorded on the credit side of the cash book in the bank column. This is because cash at bank decreases as a result of such charges. If you are ever recording entries in a three column cash book, this section presents a few key points you should bear in mind. The following is a worked example of a three Column Cash book.
A contra entry is when an entry is made on the debit side and the same entry is recorded on the credit side of the cash book. A bank account may have an overdrawn balance because by arranging an overdraft with the bank, it is possible that more money may be withdrawn from the bank than what was deposited. If the debit column is larger than the credit column, the difference represents cash at bank. If, on the other hand, the credit column exceeds the debit column, the difference represents “overdrawn balance”.
Chapter 10 – Three Column cash book
Whenever it is necessary to determine the bank balance, the bank columns are summed on both sides. If a payment is made by cheque, it will be recorded on the credit side in the bank column. If the cheque is not deposited into a bank account on the same date, it is treated as cash and, therefore, the amount will appear in cash column. It is worth mentioning that the format of a three column cash book is similar to that of a two column cash book.
The amount column in the ledger is sub divided into 3 columns each side. Discount allowed is recorded on the debit side and discount received on the credit side. Three column cash book records three types of accounts, i.e., cash, bank and discount.
Three Column Cash Book Problems and Solutions
Write up a three-column cash book from the following details. Discount allowed is an expense and this column on the credit side represents discount from suppliers during a period. Prepare a Three column cash book for the month of January. Sold merchandise to sweet Bros. for Rs 1,500 who paid by check which was deposited into bank. For the following transactions, you are required to describe side of cash book (Debit or Credit) and the column in which amount is entered (Cash, Bank or Discount). Discount allowed is an expense and discount received is an income of the business.
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Cash Book Exercises
From the following particulars write up the cash book of Rashid Khwaja Trading Co. for the month of October, 2016. Finally, in the usual manner, the receipt of cash is recorded in the cash column. The following transactions took place in the books of Samira during the month of January. Sent a check to Jones for Rs. 175; Discount received Rs. 5. Our mission is to empower readers with the most factual and reliable financial information possible to help them make informed decisions for their individual needs.
- It is customary for businesses to allow discounts for early payments.
- A bank account may have an overdrawn balance because by arranging an overdraft with the bank, it is possible that more money may be withdrawn from the bank than what was deposited.
- Sent a check to Jones for Rs. 175; Discount received Rs. 5.
- Discount column on the debit side represents a discount given to customers during a period.
- Write up a three-column cash book from the following details.
The P&G LLC records its cash and bank transactions in a triple column cash book. The following transactions were performed by the company during the month of June 2018. The procedure of posting entries from a cash book to ledger accounts has been explained in single column cash book article. The same procedure is followed for posting entries from double as well as triple column cash book to ledger accounts. Although single and double column cash books are alternatives to a cash account, the three column cash book serves the purpose of cash as well as a bank account.
What is a Three Column Cash Book?
In general ledger, two separate accounts are maintained for discount allowed and discount received. The total of discount column on credit side represents the total cash discount received from suppliers during the period and is posted to the discount received account maintained in the ledger. The cash and bank columns of triple column cash book are used as accounts and are periodically totaled and balanced just like in case of a double column cash book.
The following example summarizes the whole explanation of triple column cash book given above. It has already been explained that when a cheque is received and not deposited into a bank on the same date, the amount will be recorded on the debit side of the cash book in the cash column. The opening balance of cash in hand and cash at the bank are recorded on the debit side in the cash and bank columns, respectively. Cash discount is a reduction in the price charged for goods when a credit customer settles their debt within a time period given by the supplier. Cash discount acts as an incentive for credit customers to settle their debts quickly (prompt payment). Cash discount can be allowed to credit customers and received from credit suppliers.
