Three Column Cash Book

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on September 15, 2021

What is a Three Column Cash Book?

A cash book with three columns for discounts received and paid, cash transactions, and bank transactions is known as a three column cash book.

Explanation

A three column cash book, also known as a triple column cash book, contains three money columns on both the debit and credit sides: one on each side for recording discount, cash, and bank amounts.

If a business holds a bank account frequently makes receipts and payments through that bank account, then it is useful to maintain a three column cash book rather than a single or double column cash book.

It is customary for businesses to allow discounts for early payments. For example, if cash is paid early, creditors may receive a discount. On the other hand, if debtors pay early, a discount may be allowed to them.

You may remember that cash and discounts are closely related. This is the reason why discount columns are also provided in the 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.

Although single and double column cash books are alternatives to a cash account, the three column cash book serves the purpose of cash as well as a bank account.

Discount Columns: Key Points

Consider the following critical aspects of discount columns in a triple column cash book:

  1. The discount allowed column is located on the debit side and the discount received column is located on the credit side.
  2. The discount allowed and discount received columns represent two different accounts. They are not related.
  3. The discount columns are memorandum columns in nature. Therefore, two separate accounts, “Discount Allowed” and “Discount Received”, are opened in the ledger.
  4. 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.

Format of a Three Column Cash Book

The common format used in a three column cash book is shown below.
Standard Format of Three Column Cash Book
It is worth mentioning that the format of a three column cash book is similar to that of a two column cash book. The only exception is that a column is added in a three column cash book to account for bank-related transactions.

Hints for Record Keeping in a Three Column Cash Book

If you are ever recording entries in a three column cash book, this section presents a few key points you should bear in mind.

Opening Balance

The opening balance of cash in hand and cash at the bank are recorded on the debit side in the cash and bank columns, respectively. If the bank balance is a credit balance (overdraft), then it is entered on the credit side in the bank column.

Receipt of Cheque or Cash

If a cheque is received and deposited into a bank account on the same date, it will appear on the debit side on the cash book in the bank column.

If the cheque is not deposited into a bank account on the same date, it is treated as cash and, therefore, the amount will appear in cash column.

Finally, in the usual manner, the receipt of cash is recorded in the cash column.

Payment by Cheque or Cash

If a payment is made by cheque, it will be recorded on the credit side in the bank column. This is because the cash at bank has decreased.

If the payment is made in cash, it will be recorded in the cash column in the usual manner.

Bank Charges

Bank charges are recorded on the credit side of the cash book in the bank column. This is because cash at bank decreases as a result of such charges.

Contra Entries: Definition

If an entry is made on the debit side and the same entry is recorded on the credit side of the cash book, it is called a contra entry.

To differentiate contra entries from other entries, letter “C” is printed in the posting reference column (on both the debit and credit sides of the cash book). The letter “C” indicates that the contra effect of this transaction is recorded on the opposite side.

Contra entries may be one of the following types:

Type 1

When cash is deposited into a bank, two entries are required: one on the credit (payment) side in the cash column, which records the reduction in cash in hand; and the other on the debit (receipt) side in the bank column, which records the increase in cash at bank.

Type 2

When cash is withdrawn from a bank for office use, two entries are needed: one on the credit side in the bank column, which records the reduction of cash at bank; and the other on the debit side in the cash column, which records the increase in cash in hand.

Type 3

It has already been explained that when a cheque is received and not deposited into a bank on the same date, the amount will be recorded on the debit side of the cash book in the cash column.

When the same cheque is deposited into a bank account on another date, two entries are required: one on the debit side in the bank column, which records the increase in the amount at bank; and the other on the credit side in the cash column, which records the cash (cheque) paid into the bank.

Balancing the Three Column Cash Book

Whenever it is necessary to determine the bank balance, the bank columns are summed on both sides.

If the debit column is larger than the credit column, the difference represents cash at bank. If, on the other hand, the credit column exceeds the debit column, the difference represents “overdrawn balance”.

A bank account may have an overdrawn balance because by arranging an overdraft with the bank, it is possible that more money may be withdrawn from the bank than what was deposited.

The cash columns are balanced as usual. The discount columns are simply summed and not balanced. An overview of this procedure is given on the double column cash book page.

Posting Three Column Cash Book to Ledger Accounts

The method of posting a three column cash book into ledger is as follows:

  1. The opening balances of the cash book are not posted.
  2. Contra entries are not posted because the double entry accounting for these transactions is completed within the cash book.
  3. All items on the debit side of the cash book are posted to the credit of respective accounts in the ledger.
  4. All items on the credit side of the cash book are posted to the debit of respective accounts in the ledger.
  5. The total of the discount column on the debit side is posted to the debit of discount allowed account, and the total of the discount column on the credit side is posted to the credit of discount received account in the ledger.

Example

During May 2016, the John Trading Company made the following transactions:

May 01: Cash balance $2,200, bank overdraft $365.
May 03: Paid J & Co. by cheque $1,200, discount received amounting to $15.
May 05: Received from A & Co. a cheque for $980, discount allowed to them $20.
May 07: Deposited into bank the check received from A & Co. on May 05.
May 10: Purchased stationery for cash, $150.
May 15: Purchased merchandise for cash, $1,300.
May 15: Cash sales for the first half of the month, $2,350.
May 16: Deposited into bank $1,600.
May 18: Cash withdrawn from bank for personal expenses $150.
May 19: Issued a cheque for merchandise purchased, $1,650.
May 21: Drew cash from bank for office use, $650.
May 24: Received a cheque from S & Sons and deposited it into bank, $1,560.
May 25: Paid a cheque to Ali Inc. for $400 and received a discount of $15.
May 27: Purchased furniture in cash for office use, $390.
May 29: Paid office rent by cheque, $450.
May 30: Cash sales for the second half of the month, $4,300.
May 31: Paid salaries by check, $1,760.
May 31: Withdrew cash from bank for office use, $1,470.

Required: Record the above transactions in a three column cash book.

Solution

three column cash book example

Cash Book Exercises

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93 thoughts on “Three Column Cash Book”

  1. on may 18 cash was withdrawn from bank and this entry was credited to cash instead of bank. $150 went out of bank and not cash. bank was d giver of that amount and should have been credited.

    Reply
  2. We paid the following account by cheque in each case deducating a 2 percent cash discount S Saint $300; S Peter $480;CJone $600

    Reply
  3. @odili,,May 18 is drawings,it was credited in the cash book because in the bank statement it will appear [email protected],cash sales means he sold goods and received cash and later lodge in2 bank,it is not a contra [email protected] banked cash is the same as cash paid into bank which is contra entry,it will affects both sides,remember inn your cash book all expenses are credited and receipts or inflow re debited.

    Reply
  4. @jane there is bringing down june 1st 7380.00 for cash,while for bank there bringing down of 3805.00,it supposed to be debit balance but from the beginning of the month it is an overdraft that he has withdrawn more than what he has in the bank,that is why u have it as credit balance,remember bank is assets account which must have a debit balance,this one is credit because it overdraft..hope u are clear now

    Reply
    • We aim to keep things simple and understandable to all. Thanks for your suggestion and for stopping by our accounting resource!

      Reply
    • We aim to keep things simple and understandable to all. Thanks for your suggestion and for stopping by our accounting resource!

      Reply
    • it must be donation recieved in cash or donation paid in cash,if it donation recieve (cash) it wl b debit in u cash book.

      Reply
  5. When you receive a cheque of a certain amount but after a deduction on a certain discount do you record the amount before the deduction or after the deduction in the bank column?

    Reply
  6. sometimes there is an ‘R’ in the PR column beside the corresponding transaction just as there is a ‘C’ beside a contra entry. So I was wondering what does the R stand for??

    Reply
    • You’re welcome! Let us know what other kinds of information you’d like to see and we’ll try to add it in the future. Best of luck!

      Reply
    • That is what I thought, what kind of example is this, the author must’ve been drunk to do a mistake like this, requesting the example to be adjusted

      Reply
  7. (Receipt of cash or cheque)which is stated above as the hint to be considered while preparing 3 column cash book is not understandable…. Could u please give example by using the cash book …so that one will not has the in-depth or lacked knowledge of it.

    Reply
  8. I can’t see the solution and please where does wedges belong in a three column cash book…help send reply through this number(+2349055574432)thanks greatly.

    Reply
  9. At times I have challenges dealing with the following terms
    1 . after deducting 2% disc
    2. After allowing 5% disc
    Kindly workout any quiz having the said terms.

    Reply

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