THE THREE COLUMN CASH BOOK
This is a cash book with columns for the cash account, the bank account and the cash discount.
It is the double column cash book with additional columns for the cash discount. The columns
for the three column cash book appear as follows:
DATE
DETAILS
F
CASH
DR
CR
BANK
DR
CR
DISCOUNT
ALLOW RECEIVE
CASH DISCOUNT
This is a reduction in price given to be buyer by the seller to encourage the buyer to pay
amounts owing to the seller promptly (quickly). Cash discount is calculated as a percentage of
the total amount that the buyer owes the seller.
Mwape owes Banda K20 000 for goods bought. Banda allows Mwape to subtract a cash
discount of 2% for paying the amount owing quickly.
(a) Calculate the amount of the cash discount
(b) Amount to be paid by Mwape.
SOLUTION
(a) Cash discount = 20 000 x 2 = K400
100
(b) To be paid = 20 000 – 400 = K19 600
Cash discount is divided into:
(a) DISCOUNT ALLOWED
This is a form of cash discount that a business gives to its customer (debtors) who pay the
Money they owe the business quickly.
(b) DISCOUNT RECEIVED
This is a form of cash discount that a business receives from their suppliers (creditors) when
they pay the amounts they owe them quickly.
Both discount allowed and discount received amounts are recorded in the three column cash
book.