Three Column Cash Book¶
A Three Column Cash Book is an extension of the double column cash book, with an additional bank column on both the debit and credit sides. This allows the business to record cash transactions, discounts, and bank transactions in a single cash book, eliminating the need to maintain a separate bank account in the ledger.
Key Features:¶
- Three Columns on Each Side:
- Cash Column: Records all cash transactions, such as cash receipts and cash payments.
- Discount Column: Records discounts allowed (on the debit side) and discounts received (on the credit side).
- Bank Column: Records all transactions related to deposits in and withdrawals from the bank.
Purpose of the Bank Column:¶
- The bank column records banking transactions, such as deposits made to the bank or payments made through the bank. This ensures that all bank-related activities are tracked in the same book as cash and discount entries.
- With the addition of the bank column, there is no need to open a separate bank account in the ledger, as all bank transactions are already recorded in the cash book.
Ledger Posting:¶
- Cash transactions are posted in the cash column.
- Discounts are posted in the discount column and transferred to the ledger accounts for Discount Allowed or Discount Received.
- Bank transactions are posted in the bank column and treated similarly to cash transactions, without requiring a separate bank ledger account.
Example:¶
If a business: - Receives Rs. 15,000 in cash from a debtor with a discount of Rs. 1,000. - Deposits Rs. 10,000 into the bank. - Pays Rs. 7,000 to a creditor via a bank transfer with a discount of Rs. 500.
In the three column cash book: - On the debit side: - Cash = Rs. 15,000, Discount = Rs. 1,000, Bank = Rs. 10,000 (deposited). - On the credit side: - Bank = Rs. 7,000 (paid), Discount = Rs. 500.
The corresponding discount totals are posted to the appropriate Discount Allowed and Discount Received ledger accounts, while bank transactions are recorded directly in the cash book, replacing the need for a separate bank ledger.
Conclusion:¶
The Three Column Cash Book is a comprehensive tool for recording cash, discount, and bank transactions in one place. By consolidating all financial transactions, including those involving the bank, businesses no longer need a separate bank account in the ledger. This helps streamline accounting processes and ensures a clear record of financial activities.
How can I help you today?