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It is a cash book with cash and discount columns. As the amount column both at the debit and credit side is divided in two columns i.e., discount and cash column, so the cash book is known as ‘Double Column Cash Book’.

 

The additional discount column in the cash book records cash discount i.e., discount allowed and discount received. Cash discount is allowed or received at the time of payment. The firm has to enter into credit transaction, because of the competition in the market. Once goods are sold on credit, the seller offers the purchaser attraction in the form of discount and rebate to motivate him to make immediate and early payment.

 

The firm allows certain discount to the debtor, if he makes early payment. Discount allowed is an expense so it is debited or recorded at the debit side of the cash book, because expenses are debited for increase. The discount is allowed by the firm receiving payment, so it is an expense for it. The party making payment is benefited by the discount because it has to pay lesser. The amount paid short is discount received. It is revenue for the firm so it is credited or posted at the credit side of the cash book. Discount columns, both at the debit and credit of the cash book records actual amount of discount allowed and received. Discount columns are separately totaled. The format of double column cash book is under :

 

Cash Book with Discount Column

Dr.                               Receipts                                               Payments                                 Cr.

 

The double column cash book is prepared on the lines of simple cash book. It has only one additional column i.e., discount column. Discount column refers to discount allowed at the debit side and discount received at the credit side. Suppose, Mohan the debtor pays $ 990 and $ 10 is allowed to him as discount.

 

The transaction shows that Mohan was debtor to the extent of $ 1000. As he made immediate payment, the firm allowed him $ 10 as discount. Two column cash book represents cash and discount both. The transaction will be recorded at the debit side because it is a receipt. This is also due to the Principle of debit and credit.

 

According to this rule receiving cash will increase cash, an asset so it will be debited in the cash book. Discount will also be recorded at the debit side of the cash book, because it is an expense and increase in expense is debited. In case of payment of $ 1980 to Mohan, who allows a discount of $ 20, the transaction will be recorded at the credit side, because it is payment. Cash will decrease, so it will be credited. Discount received is an income. It is increasing so credited.

 

Illustration 9. Prepare a two-Column Cash Book from the following transactions of Shri V.K.

Gupta:

2002                                                                                                                                        $

Jan. 1 Cash in hand .. . . . . .. . .. .. . . . . . . . . . . . . .. . . . . . . . .. . . . . . . . . .. . . . . . .. . . . .. . 4, 000

Jan. 6 Cash purchases …. ………………………………………. ……………………………………………. 2,000

Jan. 10 Wages paid…… ……………….. ….. …………………………………… ………………….. …… ……. 40

Jan. 11 Cash Sales ……….. ………… ………………………………………………… …. ……. ….. …….. 6,000

Jan. 12 Cash received from Suresh and ……………………………………………… ……. …………….. 1,980

allowed him discount .. …… ………………………….. ………………….. …. …. ………. …… …………. …. 20

Jan. 19 Cash paid to Munna ………….. ……….. ……….. ……………………………… .. …… …………. 2,470

and discount received …………. …. …………………………. …… ….. ………. ………………………………… 30

Jan. 27 Cash paid to Radhey ……………. ………………………………………………………. …….. ……… 400

Jan. 28 Purchased goods for cash…. …. ……………………… ………. ….. ………………………… …. 2,070

 

Find out the total discount allowed and received.

 

Solution. Two Column (Cash and Discount) Cash Book of Shri V.K. Gupta

Cash Book

Dr.                                           Receipts                      Payments                                            Cr.

 

Explanation

 

Jan. 1. Cash in hand is the opening balance of cash and will be shown at the debit side of the Cash Book as ‘To Balance b/d’.

 

Jan. 12. Actual cash received from Suresh amounting to $ 1980 will increase cash in hand, so posted at the debit side of the Cash Book. Allowing $ 20 as discount is an expense, because the firm has been receiving $ 20 lesser. This will be debited in the cash book as expense. The transaction will be posted as ‘To Suresh’ and the respective amount will be written in the discount and cash column.

 

Balancing Cash Book. Every cash book of a going concern starts with an opening balance of cash on 1st date of the month and ends on the closing date of the month with closing balance.

 

Opening Balance. It is the closing balance of the previous month (if cash book is closed at the end of every month) or previous week (if cash book is closed at the end of every week). Opening balance may be given in one of the following ways :

 

1998                                                                                                                $

Jan. 1   Cash in hand                                                                                      1,020

Or

Opening balance of cash

Or

Cash in the beginning of the month

Or

The firm had 5. hundred rupees notes. 8, fifty rupees notes,

5. twenty rupees notes and 2, ten rupees notes on Jan. 1, 1998.

 

All the statements mentioned above show the opening balance of cash. All of them carry the same meaning. The opening balance is the cash available with the firm. Cash like other assets has a debit balance so it will be shown at the debit side of the cash book as ‘To Balance b/d’ meaning that the firm had this much money in the beginning of the month.

 

In case of newly started business, there will be no opening balance. Cash will be introduced in the business as capital in the very beginning to start and carry out business activities. Introduction of capital in the beginning will bring cash, which will be shown at the debit side of the cash book as ‘To Capital’. Learners of the subject should note that Cash Book either starts with an opening balance of cash or with the amount introduced by the firm as Capital.

 

Closing Balance

 

Cash book records the transactions of the month and is closed at the end of month to find out the available cash in hand on that date. The closing balance is the excess of debit side of the cash book over its credit side.