Chapter 10 Three Column cash book

11 Dec 2017 — TOPIC 3 – Pro Forma Financial Information … Statements of cash flows for the most recent fiscal year and the latest interim period;; Book … The following transactions took place in the books of Samira during the month of January.

John is allowed a further cash discount of 8% for prompt payment. 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.

Balancing the Three Column Cash Book

In this stage, we will make the sum of all the cash transactions both on the debit side as well as credit side using the SUM function. Sold merchandise to sweet Bros. for Rs 1,500 who paid by check which was deposited into bank. Finally, in the usual manner, the receipt of cash is recorded in the cash column.

It is customary for businesses to allow discounts for early payments. For example, if cash is paid early, creditors https://turbo-tax.org/when-does-your-child-have-to-file-a-tax-return-2020/ may receive a discount. On the other hand, if debtors pay early, a discount may be allowed to them.

problems on three column cash book

Then we will use the data to calculate the cash or bank transactions. This is the table of transactions for Company X for the month of January 2022. All cheques received are entered in the cash column on the debit side. Then, these cheques are sent to bank for collection and the treatment is similar to cash paid into bank, which is explained below. If the cheque received from a customer is sent to the bank on the same day, the amount is entered in the bank column on the debit side. 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.

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• 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).
• This means, on the debit side of Cash Book, that amount is written, in Bank Column as “To Cash” and on the credit side of cash book, the amount is written in Cash Column as “By Bank”.
• 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.
• All items on the credit side of the cash book are posted to the debit of respective accounts in the ledger.

The principle of double entry is also applicable in the three column Cash Book. Contra entries are not posted because the double entry accounting for these transactions is completed within the cash book. All items on the debit side of the cash book are posted to the credit of respective accounts in the ledger.

What is a three column cash book?

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. Our writing and editorial staff are a team of experts holding advanced financial designations and have written for most major financial media publications. Our work has been directly cited by organizations including Entrepreneur, Business Insider, Investopedia, Forbes, CNBC, and many others. Our goal is to deliver the most understandable and comprehensive explanations of financial topics using simple writing complemented by helpful graphics and animation videos.

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 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. The only exception is that a column is added in a three column cash book to account for bank-related transactions.