balance is favourable or unfavourable respectively. If there is any discount allowed it is entered in the discount column on the debit side against the particular account. Similarly, if there is any discount received, it is entered in the discount column on the credit side. .
. Format Format of three column cash book is as follows: Cash book with cash, discount and bank columns or three column cash book Cr. Receipts L.F Amount ` Payments L.F. Amount ` Discount Cash Bank Discount Cash Bank Tutorial note (i) If a business entity has more than one bank account, columns may be provided in the cash book for each bank account separately.
(ii) Treatment of cheques: In addition to cash dealings every business may use cheques as a means of payment. For the purpose of accounting, cheques received are treated as cash received. When cheques received are banked on the same day the amount is to be directly debited to the bank account. When payments is made by cheque, the bank account is credited.
Accountancy - . . Contra entry When the two accounts involved in a transaction are cash account and bank account, then both the aspects are entered in cash book itself. As both the debit and credit aspects of a transaction are recorded in the cash book, such entries are called contra entries.
Example (i) When cash is paid into bank, it is recorded in the bank column on the debit side and in the cash column on the credit side of the cash book. (ii) When cash is drawn from bank for office use, it is entered in cash column on the debit side and in the bank column on the credit side of the cash book. To denote that there are contra entries, the alphabet ‘C’ is written in L.F. column on both sides.
Contra means that particular entry is posted on the other side (contra) of the same book, because Cash account and Bank account are there in the cash book only and there are no separate ledger accounts needed for