Fundamentals of Accounting
Unit 3 – Books of original Entry – CASHBOOK
Previously we kept separate accounts for bank and cash. The cashbook brings together both
accounts into one book. There are two types of cashbook.
a) Two-column cash book – contains amount columns for bank and cash
b) Three –column cash book – contains amount columns for bank, cash and discounts
Three Column Cash Book
Discoun
Dat Foli Discoun Cas Ban Dat Foli t Cas
e Details o t h k e Details o Receive h Bank
Allowed d
As can be seen, the cash book page is divided into two equal halves. These are the debit and
credit side. Each half has a column for date, details, folio, discounts, cash and bank. The usual
rule for double entry applies, hence all cheques and cash received are entered on the debit side
under cash or bank as appropriate; all cheques and cash paid out are entered on the credit side.
The Folio Column
The folio column tells us which book to locate the corresponding entry in. The folio may be
labelled with:
Purchases ledger (PL) – Used if the corresponding entry is a supplier.
Sales Ledger (SL) - Used if the corresponding entry is a customer.
Contra-Entry (C) – used if double entry is completed in the cash book
General Ledger (GL) – used for all other accounts
Discounts
There are two types of discounts:
1. Trade Discount: A reduction given when calculating the selling price of goods. It is given
to traders to buy in bulk to enable them to make a profit. Trade discount is not part of
the double entry system.
2. Cash Discount: This is given to encourage prompt payment. There may be two types:
Discount Allowed: this is the discount that the business gives to its customers to
encourage them to pay promptly. It is an expense and is shown on the debit side of the
cash book.
Discount Received: this is the discount that is given to the business by its suppliers to
encourage the business to pay promptly. It is an expense and is shown on the debit side
of the cash book.
Question 1
Record the following transactions of S. Dillion, a retailer in his three column cash book for
month of April 2017.
April 01 Bank balance $1800; Cash balance $400
April 03 Cash sales $1490
April 08 Paid cash for cleaning $124
April 10 Received a cheque from B. Calm $1500
April 15 Purchases by cheque $1380
April 17 paid rent by cheque $750
April 19 Received a cheque from S. Lopez to settle his account of $700 less 5% cash
discount.
April 21 Paid cash into bank $1200
April 24 Received $900 cash from P. Prince to settle his account of $950
April 26 paid D. Serene by cheque to settle an account of $840 less 5% discount.
Balance the cash book and bring down the balance at the end of the month.
Question 2
The following transactions were extracted from the books of J Jordon for the month of January.
January 1 Overdrawn balance in bank $3500
Cash balance $150
2 Cash sales $70
2 Paid by cheque J Blackburn $200 less 7 ½% cash discount
3 Paid for sundry expenses by cash $23
4 Received cheque for $95 from C Long having taken a 5% discount to
which he was entitled.
7 Cheque cashed for the office $200
8 Received a cheque of $250 from J Smart in full settlement of goods sold
valued at $275
12 Cash sales $50
Wages paid by cash $25
17 Cash paid into bank $300
20 Sundry expenses paid by cash $35
21 Cash sales $105
25 Cheque drawn for personal use $43
Required: (a) Write up the three column cash book of T Jordon
(b) Post the totals of the discount columns
Question 3
Walters Stationery Store records all its cash transactions in a three column cashbook. The book
is balanced at the end of each month and the balances are carried forward to the next month.
March 1 Balances: Bank $860; Cash $140
4 Received cheque from O. Osbourne $870
Paid light bill by cheque $500
12 Cash sales $1200
Cash purchases $500
14 Received cheque from W. Watt $5000
Banked cash $800
20 J Jolly settled her debt of $1000 by cash less 10% discount
25 Paid G. Gibbons by cheque in settlement of goods previously purchased $1300
31 Paid wages by cheque $600
Required:
Prepare the three column cashbook for Walters Stationery Store
