Examkin

Question

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

A trader pays a creditor ₦19,000₦19,000 in cash after receiving a cash discount of ₦1,000₦1,000. How should the ₦1,000₦1,000 discount be entered in the trader's three-column cash book?

  1. On the credit side in the discount columnAnswer
  2. B
    On the debit side in the discount column
  3. C
    On the credit side in the cash column
  4. D
    On the debit side in the bank column

Answer

The discount of ₦1,000₦1,000 should be entered on the credit side in the discount column.
In a three-column cash book, all payments made by a business are entered on the credit side. The discount column on the credit side is dedicated to discount received from suppliers. Therefore, the ₦1,000₦1,000 cash discount must be recorded in the discount column on the credit side.

Step-by-Step Solution

1
Identify the nature of the transaction and discount
Payment to a creditor with a cash discount received of ₦1,000₦1,000.
A reduction given by a creditor for prompt payment is classified as discount received.
2
Determine column and side placement in the cash book
Enter ₦1,000₦1,000 in the discount column on the credit side.
In a three-column cash book, payments are credited. The discount column on the credit side records discount received.

Key Concept

Treatment of Discount Received in a Three-Column Cash Book
Estimated Time:45s
Rate this question

Topics

Three-Column Cash Book and Trade/Cash Discounts

More questions from this topic