Three column cash book

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What is Three Column Cash Book?

The Cash Book that has three columns for discount received and paid, cash transactions and bank transactions is called Three Column Cash Book.

Explanation

The three column cash book (also known as triple column cash book) has three money columns on both debit and credit side – one on each side for recording discount, cash and bank amounts. If a business keeps a bank account and receipts and payments are frequently made through bank account than it is useful to maintain a three column cash book rather than a single column cash book or a double column cash book.

It is the custom of the business houses that discount is allowed and received for early payments of dues. If cash is paid early, creditors may allow a discount. On the other hand, if debtors pay early, a discount may be allowed to them. It may be noted that cash and discount are related to each other that’s why discount columns are also provided in Cash Book.

Thus in three column cash book, three columns for amount are provided on each side. One column is used to record cash receipts and payments, the second column is provided to record banking transactions and in third column discount received and discount allowed are recorded.


Where, the 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 bank account.

Some key points regarding discount columns

Following are some key point regarding discount columns of triple column cash book:

  1. Discount allowed column is provided on debit side and discount received column is drawn on credit side.
  2. Discount Allowed and Discount received columns represent two different accounts. They have no relationship with each other.
  3. Discount columns are memorandum columns in nature. Therefore, two sperate account, Discount Allowed” and “Discount Received” are opened is ledger.
  4. Since there is no relationship between discount allowed and discount received, that’s why they are not balanced. both columns are separately totaled and aggregate is transferred to ledger accounts.

Format of Tripple/Three Column Cash Book

The common format of three column cash book is given below:

format of three column cash book or triple column cash book

Notice that the format of three column cash book is similar to that of a two column cash book with the exception of an additional column to account for bank related transactions.

Hints for recording in three/triple column cash book

Remember the following points while recording entries in a three column cash book:

(1). Opening balance: The opening balance of cash in hand and cash at bank are recorded on the debit side in cash and bank column respectively. If the bank balance is a credit balance (overdraft) then it is entered on the credit side in the bank column.

(2). Receipt of check or cash: If a check is received and is deposited into bank account on the same date, it will appear on the debit side on the cash book in bank column. If the check is not deposited into bank on the same date, the check is treated as cash and therefore the amount will appear in cash column. The receipt of cash is recorded in the cash column in usual manner.

(3). Payment by check or cash: If payment is made by check, it will be recorded in the credit side in the bank column because the cash at bank is decreased. If the payment is made in cash, it will be recorded in cash column in usual manner.

(4). Bank charges: Bank charges are recorded on the credit side of cash book in bank column because cash at bank is decreased as a result of such charges.

What are Contra entries:

If an entry is made on the debit side and the same entry is recorded on the credit side of the cash book, it is called a “contra entry“. In order to distinguish the contra entries from other entries, letter “C” is put in posting reference column against these entries on both debit and credit sides of the cash book. Letter “C” shows that the contra effect of this transaction is recorded on the opposite side. Contra entries may be of the following types:

  1. When cash is deposited into bank by the office two entries are required, one on the credit (payment) side in the cash column to record the reduction in cash in hand and the other on the debit (receipt) side in the bank column to record the increase in cash at bank.
  2. When cash is withdrawn from bank for office use, two entries are needed, one on the credit side in the bank column to record the reduction of cash at bank and the other on the debit side in the cash column to record the increase in cash in hand.
  3. It has already been explained that when a check is received and not deposited into bank on the same date, the amount will be recorded on the debit side in the cash column. When the same check is deposited into bank account on another date, two entries are required, one on the debit side in the bank column to record the increase in amount at bank and the other on the credit side in the cash column to record the cash (check) paid into bank.

Balancing the three column cash book

Whenever it is desired to ascertain the bank balance, the bank columns are totaled on both sides. If debit column is bigger than the credit column, the difference represents cash at bank. If, on the other hand, credit column is bigger than the debit column, the difference represents “overdrawn balance”. 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 has been deposited.

The cash columns are balanced as usual. The discount columns are just totaled and not balanced. See the procedure on double column cash book page.

Posting three column cash book to ledger accounts

The method of posting a three column cash book into ledger is as follows:

  1. The opening balances of cash book are not posted.
  2. Contra entries are not posted because the double entry accounting for these transactions is completed within the cash book.
  3. All items on the debit side of the cash book are posted to the credit of respective accounts in the ledger.
  4. All items on the credit side of the cash book are posted to the debit of respective accounts in the ledger.
  5. The total of discount column on the debit side is posted to the debit of discount allowed account and the total of discount column on credit side is posted to the credit of discount received account in the ledger.

Example

The John trading company has undertaken the following transactions during the month of May 2016.

Year: 2016
May 01: Cash balance $2,200, bank overdraft $365.
May 03: Paid J & Co. by check $1,200, discount received from him $15.
May 05: Received from A & Co. a check for $980, discount allowed to them $20.
May 07: Deposited into bank the check received from A & Co. on May 05.
May 10: Purchased stationary for cash, $150.
May 15: Purchased merchandise for cash, $1,300.
May 15: Cash sales for the first half of the month, 2,350.
May 16: Deposited into bank $1,600.
May 18: Cash withdrawn from bank for personal expenses $150.
May 19: Issued a check for merchandise purchased, $1,650.
May 21: Drew from bank for office use, $650.
May 24: Received a check from S & Sons and deposited the same into bank, $1,560.
May 25: Paid a check to Ali Inc. for $400 and received a discount of $15.
May 27: Bought furniture for cash for office use, $390.
May 29: Paid office rent by check, $450.
May 30: Cash sales for the second half of the month $4,300.
May 31: Paid salaries by check $1,760.
May 31: Withdrew from bank for office use $1,470.

Required: Record the above transactions in a three/triple column cash book.

Solution

three column cash book example

Cash book exercise:

54 thoughts on “Three column cash book”

  1. lamech ongeri says:

    There is this transaction which usually appear last like, he banked all cash except for example 1000,, how is it done?

    1. boniface says:

      how do we handle the issue of banking everything except e.g 100

    2. Philip says:

      A transaction usually appear at the end of a transaction like, he banked all cash except for
      example 3000,, how is it done?

      1. Ridwan abdulrashid says:

        You will debit the bank and credit the cash

    3. Michelle says:

      You need to total the cash column on the debit side minuz with the total cash column on the credit side … after that minuz with 1000 … it will be recorded as contra entry in the three column cash book

      1. Sheila says:

        Makes sense thanks

  2. jane says:

    how comes everything is balancing ,no bringing down or carring

    1. yvonne says:

      Jane there is bal cd on the debit side

  3. james says:

    Please how do you place this transaction,drawing by cheque 1000

    1. Michelle says:

      Dr drawings cr bank … at the credit side it will be drawings and enter 1000 on the bank column

    2. sophie says:

      drawing is an expense and all expenses are recorded on the credit side of the cashbook……so u just need on the credit side record drawing on details part ad the amount in bank column since its made via bank cheque

    3. Ridwan abdulrashid says:

      Credit the 1000naira in the bank

  4. Obasi says:

    Still I cannot understand please Can you leave a video for me

  5. odili says:

    on may 18 cash was withdrawn from bank and this entry was credited to cash instead of bank. $150 went out of bank and not cash. bank was d giver of that amount and should have been credited.

    1. Farah says:

      Yeah…seems like we r sailing in the same boat..i have the same doubt too

  6. Nosirat says:

    What Of Cash Drawing And Cash Sales Paid Direct Into The Bank

  7. Edrisa Conteh says:

    I think if you can put videos it will be easy to understand

    1. Lubangakene keneth says:

      Received a check of $980 on 5 may,why did u put it on the cash column

      1. Aimaah says:

        Because the cheque what v Are recieving is equal to cash v will count it as cash until v deposit it into bank

  8. colin says:

    I don’t buy this solution.. I don’t see how b/d can be credit

    1. rashidjaved says:

      It is bank overdraft.

  9. Hlaing Hlaing Nwe says:

    We paid the following account by cheque in each case deducating a 2 percent cash discount S Saint $300; S Peter $480;CJone $600

    1. Hlaing Hlaing Nwe says:

      I want answer

  10. Jesus yol Bior says:

    Very difficult to understand

  11. audrey says:

    I still I can not understand please can you leave video from me plzz

  12. Sasha says:

    “Sold goods on credit to someone”
    How would that be on the three column cash book?

    1. rashidjaved says:

      Credit transactions are not recorded in cash book.

    2. ravi says:

      credit purchase are not recorded in cash kyuki credit purchase se related purchase a/c me jayega

      1. Mbithi kelvin says:

        It’s really nice

  13. MARVINS DANIEL ONYENENUE says:

    @odili,,May 18 is drawings,it was credited in the cash book because in the bank statement it will appear [email protected],cash sales means he sold goods and received cash and later lodge in2 bank,it is not a contra [email protected] banked cash is the same as cash paid into bank which is contra entry,it will affects both sides,remember inn your cash book all expenses are credited and receipts or inflow re debited.

  14. MARVINS DANIEL ONYENENUE says:

    @jane there is bringing down june 1st 7380.00 for cash,while for bank there bringing down of 3805.00,it supposed to be debit balance but from the beginning of the month it is an overdraft that he has withdrawn more than what he has in the bank,that is why u have it as credit balance,remember bank is assets account which must have a debit balance,this one is credit because it overdraft..hope u are clear now

  15. REDDY ARAVIND says:

    Show videos to understand perfectly and show in common english

  16. fvvv says:

    Which of the following is correct

  17. makovo samuel muema says:

    I propose it would have been better if you opened ledger accounts of the same.

  18. YADUKRISHNA says:

    I think if you can put videos it will be easy to understand

  19. Cm says:

    Good

  20. TA says:

    Very good but money must be deducded with discount for example $10 in bank with $1 discount so in bank $9 and in discount $1.

  21. Moses E. Adikwu says:

    Hw To Solve,paid Wages To Petience 2000 Moses 3000 Naja’atu 4000 And Comfort 6000 By Cash

  22. yuom Angok says:

    better to solve it with sound

  23. Shivam Semwal says:

    Which side donation is recorded??

    1. Sunday anebi says:

      it must be donation recieved in cash or donation paid in cash,if it donation recieve (cash) it wl b debit in u cash book.

  24. jassica ani says:

    jhi

  25. Collins masinde says:

    You have used clear points faciltating easy understanding

  26. Fakih Mzee says:

    When you receive a cheque of a certain amount but after a deduction on a certain discount do you record the amount before the deduction or after the deduction in the bank column?

  27. sakib says:

    sometimes there is an ‘R’ in the PR column beside the corresponding transaction just as there is a ‘C’ beside a contra entry. So I was wondering what does the R stand for??

  28. kipyegon says:

    i see the entries of pr including 96 and 105 where do they emerge from?

  29. Surya says:

    What is the meaning of PR column

  30. Paul says:

    i really appreciate this..has opened my mind.

  31. Victoria says:

    My own is different
    How come I didn’t get what I got in my credit side

  32. Jerry says:

    example paid jerry his account TZS.1500 by cash, TZS 1200 having deducted TZS 1700 cash discount.How it is done?

  33. chinenye vivian says:

    there was a mistake on may 05th A&co.received a check for 980. so we have to Dr A&co. bank 980 not in cash column

  34. Nasasira Jacob says:

    How do post transactions with discounts in the ledgers? An example can explain better

  35. Kuldeep says:

    Solve this entry please .
    Settled the account of Mohan by paying cash ₹13000.

  36. Jakod says:

    Kuldeep
    Cr….cash
    Dr…..mohan

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