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Three-column cash book

A three-column cash book has three columns on the debit side and three columns on the credit side. The three columns are usually in this order: first column after the folio column is used for recording discounts, the next (middle) column is for cash transactions and the last one for bank transactions.

Discounts are offered to encourage quick payment. For discounts allowed or sales discounts, they are recorded in the discounts column always on the debit side of the cash book. Discounts received or purchases discounts are entered in the discounts column always on the credit side of the cash book. At the end of each period, the discounts columns are totalled for posting.

Contra entries

If the same amount is recorded twice on both the debit and credit sides, it is usually a contra entry. There are reasons for this to happen.

  • When a sum of cash is received and banked immediately, it is entered in the cash column on the credit side, and again in the bank column on the debit side. This decreases the cash balance and increases the bank balance as the cash is transferred from the cash account to the bank account.
  • If cash is required, it may be withdrawn from the bank. A cheque is issued for the required amount and this is entered in the bank column on the credit side. When the cheque is cashed, it boosts the cash balance. The cash amount is therefore entered in the cash column on the debit side as cash is always a debit balance.

Posting to the ledgers

Contra entries which are easily identified in the folio column by the ā€˜Cā€™ are not posted to the ledgers. Other items not posted to the ledgers include the opening balances of both cash and bank. All other items are posted including the discounts. At the end of each period, discounts are transferred to the general ledger to complete the double entry.

  • Total of discounts allowed in the cash book is debited to the discounts allowed account.
  • Total of discounts received in the cash book is credited to the discounts received account.

A three-column cash book

Date Particulars Folio Discount Cash Bank
Date Particulars Folio Discount Cash Bank
20XX

$ $ $
20XX

$ $ $
Jan 01 Balance b/d

300 400
Jan 05 C Carp 50 950
Jan 07 T Turtle 30 570 Jan 10 Rent 300
Jan 11 Sales 740 Jan 12 Purchases 230 350
Jan 18 F Fish 40 760 Jan 19 Bank C 300
Jan 19 Cash C 300 Jan 24
E Eel 30 570
Jan 23 Sales 730 Jan 26 Cash C 200
Jan 26 Bank C 200 Jan 30 Wages 400


Jan 31
Balance c/d 200 500
70 2,000 2,000
80 2,000 2,000


General Ledger

Sales

Date Particulars Folio Amount
Date Particulars Folio Amount
20XX
Jan 11
Cash
CB26 740
Jan 23 Bank CB26 730


Purchases

Date Particulars Folio Amount
Date Particulars Folio Amount
20XX
Jan 12
Cash & Bank CB26 580


Rent

Date Particulars Folio Amount
Date Particulars Folio Amount
20XX







Jan 10
Cash
CB26 300





Wages

Date Particulars Folio Amount
Date Particulars Folio Amount
20XX
Jan 30
Cash CB26 400


Discounts Allowed

Date Particulars Folio Amount
Date Particulars Folio Amount
20XX
Jan 31
Total for the month CB26 70


Discounts Received

Date Particulars Folio Amount
Date Particulars Folio Amount





20XX







Jan 31
Total for the month
CB26 80


Sales Ledger

T Turtle

Date Particulars Folio Amount
Date Particulars Folio Amount
20XX
Jan 07
Bank
CB26 570


F Fish

Date Particulars Folio Amount
Date Particulars Folio Amount





20XX







Jan 18
Cash
CB26 760


Purchases Ledger

C Carp

Date Particulars Folio Amount
Date Particulars Folio Amount
20XX







Jan 05 Bank CB26 950





E Eel

Date Particulars Folio Amount
Date Particulars Folio Amount
20XX







Jan 24
Cash
CB26 570




Last Updated (Friday, 03 September 2010 13:47)