Sub-Division of Journal : Cash Book

Only totalled and never balanced

Step 1: In a Triple Column Cash Book, there are three columns on each side – Discount, Cash, and Bank. Step 2: The Cash and Bank columns represent real accounts and are balanced in the usual manner. Step 3: However, the Discount columns are MEMORANDUM columns – they are not real accounts. Step 4: They simply record discount totals for convenience and are only TOTALLED at the end of the period. Step 5: The totals of discount columns are then posted to 'Discount Allowed Account' (debit side total) and 'Discount Received Account' (credit side total) in the ledger separately. They are never balanc

Through a journal entry – Debit 'Cheque in Hand A/c', Credit Ramesh's A/c on 5th January

Step 1: When a cheque is received and deposited on the SAME day, it is directly entered in the bank column of the cash book on the debit side. Step 2: BUT when the cheque is received on one date and deposited on a LATER date, the procedure is different. Step 3: On the date of receipt (5th Jan), a journal entry is passed: Dr. Cheque in Hand A/c, Cr. Ramesh's A/c – because the cheque is in hand but not yet in bank. Step 4: On the date of deposit (10th Jan), the bank column of the cash book is debited by writing 'To Cheque in Hand A/c'. Step 5: This two-step process correctly tracks when the cheq

'By Balance b/d' on the credit side in the bank column

Step 1: A normal bank balance (favourable) means the bank owes us money – this is an asset, shown as 'To Balance b/d' on the DEBIT side of the bank column. Step 2: Bank OVERDRAFT means WE owe money to the bank – this is a liability. Step 3: A liability (overdraft) means our bank column shows a CREDIT balance. Step 4: Therefore, opening overdraft balance is written as 'By Balance b/d' on the CREDIT side in the bank column. Step 5: Cash column always shows debit balance (you cannot pay more cash than you have), but bank column can show credit balance (overdraft) when we withdraw more than deposi

Credit side; it is an income/gain for the business

Step 1: Discount received means OUR creditors allow us a reduction on the amount we owe when we pay promptly. Step 2: This is a financial gain/income for our business since we pay less than what was owed. Step 3: Being income (nominal account), it is CREDITED as per the rule 'Credit all incomes and gains'. Step 4: In the Triple Column Cash Book, it appears in the Discount column on the CREDIT (payment) side. Step 5: Contrast this with Discount Allowed – we give discount to debtors – this is an expense, recorded on the DEBIT side of the discount column. Never confuse the two!