Three Column Cash Book:
Learning Objectives:
-
Define and explain a three column cash
book/treble column cash book.
-
Prepare a three column cash book.
-
What is the difference between a single column
cash book, a double column cash book and a three column cash book?
Definition and Explanation:
A three column cash book or treble
column cash book is one in which there are three columns on each side -
debit and credit side. One is used to record cash transactions, the second
is used to record bank transactions and third is used to record discount
received and paid.
When a trader keeps a bank account it becomes
necessary to record the amounts deposited into bank and withdrawals from it.
Fir this purpose one additional column is added on each side of the cash
book. One of the main advantages of a three column cash book is
that it is very helpful to businessmen, since it reveals the cash and bank
deposits at a glance
Writing a Three column Cash Book:
Opening Balance:
Put the opening balance (if any) on cash in
hand and cash at bank on the debit side in the cash book and bank columns.
If the opening balance is credit balance (overdraft) then it will be put in
the credit side of the cash book in the bank column.
Cheque/Check or Cash Received:
If a cheque is received from any person and is
paid into the bank on the same date it will appear on the debit side of the
cash book as "To a Person". The amount will be shown in the bank column. If
the cheque received is not deposited into the bank on the same date then the
amount will appear in the cash column. Cash received will be recorded in the
usual manner in the cash column.
Payment By Cheque/Check or Cash:
When we make payment by cheque, this will
appear on the credit side "By a person" and the amount in the bank column.
If the payment is made in cash it will be recorded in usual manner in the
cash column.
Contra Entries:
If an amount is entered on the debit side of
the cash book, and the exact amount is again entered on the credit side of
the same account, it is called "contra entry". Similarly an amount entered
on the credit side of an account also may have a contra entry on the debit
side of the same account.
Contra entries are passed when:
-
Cash is deposited into bank by
office: It is payment from cash and receipt in
bank. Therefore, enter on credit side, cash column "By Bank" and on debit
side bank column "To Cash". The reason for making two entries is to comply
with the principle of double entry which in such transactions is completed
and therefore, no posting of these items is necessary. Such entries are
marked in the cash book with the letter "C" in the folio column
-
Cheque/Check is drawn for office use:
It is payment by bank and receipt in cash. Therefore, enter on the debit
side, cash column "To Bank" and on credit side, bank column "By Cash".
Bank Charges and Bank Interest Allowed:
Bank charges appear on the credit side, bank
column "Bank Charges." Bank interest allowed appear on the debit side, bank
column "To Interest".
Posting:
The method of posting three column cash book
into the ledger is as follows:
-
The opening balance of cash in hand and cash
at bank are not posted.
-
Contra Entries marked with "C" are not posted.
-
All other items on the debit side will be
posted to the credit of respective accounts in the ledger and all other
items on the credit side will be posted to the debit of the respective
accounts.
-
As regards discounts the total of the discount
allowed will be posted to the debit of the discount account in the ledger
and total of the discount received to the credit side of the discount
account.
Format of the Three Column Cash Book:
Debit Side
Credit Side
|
Date |
Particulars |
V.N. |
L.F. |
Dis-count |
Cash |
Bank |
Date |
Particulars |
V.N. |
L.F. |
Dis-count |
Cash |
Bank |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Example of Three Column Cash Book:
On January 1, 1991 Noorani Stores cash book
showed debit balance of cash $1,550 and bank $13,575. During the month of
January following business was transacted.
|
1991 |
|
|
Jan.1 |
Purchased
office typewriter for cash $750; cash sales $315 |
|
" |
Deposited
cash $500 |
|
" 4 |
Received
from A. Hussan a cheque for $2,550 in part payment of his account |
|
" 6 |
Paid by
cheque for merchandise purchased worth $1,005 |
|
" 8 |
Deposited
into bank the cheque received from A. Hussan. |
|
" 10 |
Received
from Hayat Khan a cheque for $775 in full settlement of his account
and allowed him discount $15. |
|
" 12 |
Sold
merchandise to Divan Bros. for $1,500 who paid by cheque which was
deposited in the bank. |
|
" 16 |
Paid
Salman $915 by cheque, discount received $5 |
|
" 27 |
Paid to
Gulzar Ahmad by cheque $650 |
|
" 30 |
Paid
salaries by cheque $1,750 |
|
" 31 |
Deposited
into bank the cheque of Hayat Khan. |
|
" 31 |
Drew from
bank for office use $250. |
You are required to enter the above
transactions in three column cash book and balance it.
Solution:
Noorani Stores
Cash Book
Debit Side
Credit Side
|
Date |
Particulars |
V.N. |
L.F. |
Dis-count |
Cash |
|
Date |
Particulars |
V.N. |
L.F. |
Dis-count |
Cash |
|
|
1991
Jan.1
" 1
" 3
" 4
" 8
" 10
" 12
" 31
" 31
1991
Feb.1 |
To Balance b/d
To Sales a/c
To Cash a/c
To A Hussan
To Cash
To Hayat Khan
To Sales a/c
To Cash
To Bank
To Balance b/d |
|
C
C
C
C
|
15 |
1,550
1,315
2,550
775
250 |
13,575
500
2,550
1,500
775
|
1991
Jan.1
" 3
" 6
" 8
" 16
" 27
" 30
" 31
" 31 |
By Office Equip.
By Bank
By Purchases a/c
By Bank
By Salman
By Gulzar
By Salaries a/c
By Bank
By Cash
By Balanced c/d
|
|
C
C
C
C |
5 |
750
500
2,550
775
1,865
|
1,005
915
650
1,750
250
14,330 |
|
15 |
6,440 |
18,900 |
5 |
6,440 |
18,900 |
| |
1,865 |
14,330 |
|
|
|
Sales Account
| |
|
|
1991
Jan. 1
" 12 |
By Cash
By Cash |
$
1,315
1,500 |
A. Hussan
| |
|
|
1991
Jan. 4 |
By Cash |
$
2,550 |
Hayat Khan
|
|
|
|
1991
Jan. 10 |
By Cash
By Discount |
$
775
15 |
Office Equipment Account
|
1991
Jan. 1 |
To Cash |
$
750 |
|
|
|
Purchase Account
|
1991
Jan. 6 |
To Cash
|
$
1,005
|
|
|
|
Salman
|
1991
Jan. 16 |
To Cash
To Discount |
$
915
5 |
|
|
|
Gulzar Ahmad
|
1991
Jan. 27 |
To Cash |
$
650 |
|
|
|
Salaries Account
|
1991
Jan. 30 |
To Cash |
$
1,750 |
|
|
|
Discount Account
|
1991
Jan. 31 |
To Sundries as per Cash book |
$
15 |
1991
Jan. 31 |
By Sundries as per cash book |
5
|
|
