ANALYTICAL THREE COLUMN CASH BOOK

Subject: 

ACCOUNTING

Term:

FIRST TERM

Week:

WEEK 8

Class:

SS 1

Topic:

ANALYTICAL CASH BOOK

Behavioural objectives:

At the end of the lesson, the learners will be able to

• identify the form of single
  and double column cash
  book.
•  post transaction into single
  and double columnar cash
  book.
•  identify the form of the
  three column cash books.
• post transactions into three
  columnar cash book.

 

Previous lesson: 

The pupils have previous knowledge of

BOOK KEEPING AND ACCOUNTING

that was taught as a topic in the previous lesson

 

 

Instructional Materials:

• Wall charts
• Pictures
• Related Online Video
• Flash Cards

 

 

Methods of Teaching:

• Class Discussion
• Group Discussion
• Asking Questions
• Explanation
• Role Modelling
• Role Delegation

 

Reference Materials:

• Scheme of Work
• Online Information
• Textbooks
• Workbooks

 

 

CONTENT 

A cash book is a financial journal that records all cash receipts and payments, including bank deposits and withdrawals. A single column cash book records only cash transactions, while a double column cash book also records credit transactions

An effective cash book can help you track your inflows and outflows of cash, which is important in managing your business finances. A cash book can also help you prepare for tax season by providing documentation of your income and expenses

Here is a basic outline of what you should include in your cash book

1.  The date of the transaction
2. A description of the transaction
3.  The amount of cash received or paid
4.  The name of the person or company involved in the transaction
5.  The balance of cash on hand after the transaction is recorded

If you are using a double column cash book, you will also need to include columns for credits and debits. Credits are payments made by customers, while debits are payments made to suppliers

Here are five questions to consider when setting up your cash book

1. What accounting method will you use?
2. How often will you reconcile your cash book with your bank statements?
3. Who will be responsible for entering transactions into the cash book?
4. How will you protect your cash book from theft or loss?
5. What other financial records will you need to keep in order to prepare your tax returns?

By following these simple guidelines, you can set up an effective cash book that will help you track your business finances and prepare for tax season.

When posting a transaction into a single or double columnar cash book, there are a few important things to keep in mind. First, be sure to record the date, description, and amount of the transaction. Next, determine which type of cash book (single or double columnar) you will be using. Finally, post the transaction accordingly.

 

Difference between a single column cash book and double column cash book

A single column cash book is a subsidiary book that records all cash receipts and cash disbursement transactions. This type of cash book typically only has one side for recording transactions, making it simpler than a double column cash book

A double column cash book is a subsidiary book that records all cash and bank-based transactions. This type of cash book typically has two sides for recording transactions, one for cash and one for bank. This makes it more complicated than a single column cash book, but it provides more information about the financial health of a business.

 

What is the format of double column cash book?

In  a double column cash book, there are two columns for each side of a transaction. One column is for the cash account and the other column is for the bank account. The format of a double column cash book can be seen in the following example:

Cash Receipts

Date | Cash | Bank

————————————————–

1/1/2018 | $500.00 | $0.00

2/1/2018 | $0.00 | $600.00

3/1/2018 | $700.00 | $0.00

Cash Disbursements

Date | Cash | Bank

————————————————–

1/1/2018 | $0.00 | $400.00

2/1/2018 | $300.00 | $0.00

3/1/2018 | $0.00 | $500.00

As you can see from the example, a double column cash book has two columns for each side of every transaction. One column is for the cash account and the other column is for the bank account. This allows you to see all of your cash and bank transactions in one place.

 

Three column cash book

In a three-column cash book, three columns are provided for the amounts on each side. One column records cash receipts and payments, the second records banking transactions, and the third records discounts received and allowed. Cash payments are recorded in the first column on the left-hand side, while cash receipts are entered in the first column on the right-hand side. Banking transactions are recorded in the second column on each side, with discounts received appearing in the third column on the right-hand side and discounts allowed appearing in the third column on the left-hand side.

This system provides a comprehensive record of all cash transactions, both receipts and payments, as well as those relating to banking and discounting.

 

When recording transactions in a three-column cash book, there are three columns for the amounts on each side. The first column is for cash receipts and payments, the second column is for banking transactions, and the third column is for discounts received and allowed

For example, if a business receives $100 in cash from a customer, they would record this in the first column as a cash receipt. If they then deposited this money into their bank account, they would record the deposit in the second column. And if they received a $10 discount on an invoice, they would record this in the third column as a discount received

Similarly, if a business made a $50 payment for rent in cash, they would record this in the first column as a cash payment. If they then withdrew $100 from their bank account to pay an employee, they would record the withdrawal in the second column. And if they allowed a $5 discount on an invoice, they would record this in the third column as a discount allowed. By using a three-column cash book, businesses can keep track of all their financial transactions in one place. This can be helpful in preparing financial statements and filings, as well as in tracking expenses and income over time.

 

Discount Columns: Key Points To Note

1. Discount columns are an important part of a triple column cash book. Discounts can be given to customers for early payments, or received from suppliers for prompt payments. It is important to consider the following key points when using discount columns:
2. – The discount allowed column is located on the debit side, and the discount received column is located on the credit side.
3. – The discount allowed and discount received columns represent two different accounts. They are not related.
4. – The discount columns are memorandum columns in nature. Therefore, two separate accounts, “Discount Allowed” and “Discount Received”, are opened in the ledger.
5. – Since discount allowed and discount received are unrelated, they are not balanced. Both columns are summed separately and the aggregate is transferred to the ledger accounts.
6. – The balance in the “Discount Allowed” account is a debit balance and the balance in the “Discount Received” account is a credit balance.

Format of a Three Column Cash Book

The mostly used format for a three-column cash book is shown below.

Discount Allowed Discount Received

Dr. Cr. Dr. Cr.

Date Particulars $ Discount Allowed $ Discount Received

Beginning balance

Total debit side entries

Total credit side entries

Ending balance

Example of a Three Column Cash Book Entry with a Discount Allowed

Let’s assume that on January 1, 2020, Company XYZ starts its business with $10,000 cash. On January 2, 2020, it purchases office supplies on credit from ABC Suppliers for $500. The terms of the purchase were 2/10, n/30, which means that a 2% discount can be taken if the bill is paid within 10 days, otherwise the full amount is due in 30 days. Company XYZ pays the bill on January 12, 2020, taking the 2% discount. The journal entry to record this transaction would be as follows:

Discount Allowed Discount Received

Dr. Cr. Dr. Cr.

1/2/20 Purchases $10 $0

1/12/20 Cash $490 $0

As can be seen from the entry, the discount column is used to record the amount of the discount taken ($10). The balance in the “Discount Allowed” column is a debit balance of $10.

Example of a Three Column Cash Book Entry with a Discount Received

Now let’s assume that on January 1, 2020, Company XYZ starts its business with $10,000 cash. On January 2, 2020, it sells office supplies on credit to ABC Customers for $500. The terms of the sale were 2/10, n/30, which means that the customer can take a 2% discount if the bill is paid within 10 days, otherwise the full amount is due in 30 days. ABC Customers pays the bill on January 12, 2020, taking the 2% discount. The journal entry to record this transaction would be as follows:

Discount Allowed Discount Received

Dr. Cr. Dr. Cr.

1/2/20 Sales $0 $10

1/12/20 Cash $0 $490

As can be seen from the entry, the discount column is used to record the amount of the discount received ($10). The balance in the “Discount Received” column is a credit balance of $10.

Advantages of Using a Three Column Cash Book

There are several advantages to using a three column cash book over a two column cash book.

1. It provides separate records for discounts allowed and received. This information can be useful in making future pricing decisions.

2. It ensures that the discount columns are not used to conceal errors.

3. It makes it easier to prepare the ledger accounts for “Discounts Allowed” and “Discounts Received”.

4. It makes the bookkeeping entries simpler and easier to understand.

Disadvantages of Using a Three Column Cash Book

There are also some disadvantages to using a three-column cash book.

1. It requires more effort to maintain than a two-column cash book.

2. It can be confusing for people who are not familiar with accounting.

3. It is not necessary for small businesses.

4. It can be difficult to find software that supports three column cash books.

 

Evaluation

1. What is a three column cash book?

2. What are the advantages of using a three column cash book?

3. What are the disadvantages of using a three column cash book?

4. How do you record discounts allowed in a three column cash book?

5. How do you record discounts received in a three column cash book?

Conclusion

The subject teacher wraps up or concludes the lesson by giving out short notes to summarize the topic that he or she has just taught.

The class teacher also goes round to make sure that the notes are well copied or well written by the pupils.

He or she makes the necessary corrections when and where the needs arise.