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Difficulty: EasyThree-Column Cash Book and Trade/Cash Discounts

In a three-column cash book, on which side and in which column is a cash discount granted to a customer recorded?

  1. Debit side in the discount columnAnswer
  2. B
    Credit side in the discount column
  3. C
    Debit side in the cash column
  4. D
    Credit side in the bank column

Answer

Debit side in the discount column
In accounting, discounts granted to customers for prompt payment are known as discounts allowed. In a three-column cash book, the debit side contains three columns: Discount, Cash, and Bank. Discount allowed is recorded directly in the discount column on the debit side, adjacent to the cash or bank receipt entry.

Step-by-Step Solution

1
Identify the nature of cash discount granted to a customer.
Cash discount allowed to a customer is an expense (Discount Allowed) granted for prompt settlement of an account.
When customers settle their accounts early, the discount allowed reduces the amount of cash or cheque collected.
2
Determine the correct column and side in the three-column cash book.
The debit side of the three-column cash book records receipts and contains a dedicated 'Discount Allowed' column alongside Cash and Bank columns.
Discounts allowed are entered on the debit side in the discount column adjacent to the receipt entries.

Key Concept

Placement of Discount Allowed in the Three-Column Cash Book
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Topics

Three-Column Cash Book and Trade/Cash Discounts

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