Three Column Cash Book

Definition of Three Column Cash Book

Three column cash book is a book in which three money columns are available on both debit and credit sides such as discount, cash, and bank.

In short, if we add a discount column to the double column cash book it will become three column cash book. It is the most comprehensive form of cash book and is also named a triple column cash book.

Explanation

Today in the modern era where competition is so high in the business field. Every businessman endeavors to increase their profit to stable their product prices. In order to earn more profit and attract their customer every businessman provide discount on products.

There are two types of discounts:

1. Trade discount
2. Cash discount

A discount subtracted from the price list is known as a trade discount—for example, the discount which the wholesaler usually grants to its retailers. The trade discount is not listed separately in the books and the trade discount is deducted from the price list and the entries are passed.

While cash discount is paid to the debtor as an instigate to pay off his debt within the prescribed time. The main object of cash discounts is to ensure quick payments. Cash discount has further divided into two categories:

• Discount Allowed
• Discount Received

Discount allowed is a concession given by the seller to his customers in order to enable them to make quick payments. Cash discount allowed is proceeded as operating expense and which is why it is listed in the profit and loss account at the end of the accounting year.

While Discount received is the advantage to the buyers and recorded on the same terms as the discount allowed. For the buyers discount received proceeded as an operating income.

Format of Tripple / Three Column Cash Book

Explanation of columns

Date:

In the date column, the actual date of the accounting transaction is listed.

Receipts/payments: (Particulars)

In the particulars column name of the parties or transaction in which it is debited or credited is listed.

Voucher Number: (Vr. No.)

This column is related to the serial number of the cash transaction. The serial number of all receipts is listed on the debit side and the serial number of all payments is listed on the credit side in the voucher column of the three column cash book.

Ledger Folio (Page reference P.R.)

The ledger folio is used to record page numbers against every detail when entries are posted in the ledger account.

Cash column: (Amount)

This column lists the number of cash transactions during the year or month. The amount of cash received during the year/month is recorded on the debit side. Similarly, the amount of cash paid during the year/month is recorded on the credit side of the cashbook.

Discount column:

The discount allowed is listed on the debit side and the discount received is listed on the credit side of three column cash book in the discount column. The total of discount entries on the debit side is transferred as a debit to the discount allowed account and the total on the credit side as credit discount received.

Bank column:

In the bank column of the cashbook, all cash deposited and withdrawn is listed. While other procedures and important points relating to the bank column have already been described in the double column cash book article.

Example

Solution

Three column cash book

Balancing three column cash book

The cash column is balanced as general. The procedure of balancing the cash column has already been described in the single column cash book.

To find out the balance of the bank column, both sides are summed. If the debit balance is heavier than the credit balance, the difference is recorded as “cash at bank”. On the contrary, if the credit side is heavier than the debit side, the difference is recorded as an “overdrawn balance”.

The discount column of both the debit and the credit side is summed only and balanced at the end of the accounting year/month.

Posting entries to three column cash book

1. The opening balance of the debit side termed as cash in hand is not posted to any ledger.
2. Contra entries are not transferred to the ledger account, because the purpose of the transaction is completed in three column cash book.
3. All transactions listed on the debit side are transferred to the credit side of the relevant ledger.
4. While all transactions listed on the credit side are transferred to the debit side of the relevant ledger.
5. The total of discount entries on the debit side is transferred as a debit to the discount allowed account.
6. The total of discount entries listed on the credit side is transferred as credit to the discount received.

Discount Allowed Ledger

Discount Received Ledger