Cash Book with Cash and Discount Columns: Format MCQs Quiz | Class 9
This quiz is for Class IX students studying Elements of Book-Keeping & Accountancy (Code 254), focusing on Unit 6: Recording and Posting of Cash Transactions. It covers the format and application of a two-column cash book, including transactions with cash and discount columns (discount allowed and discount received). Attempt all questions and click ‘Submit Quiz’ to see your score. You can then download a PDF of your answers.
Understanding the Two-Column Cash Book
A Cash Book is a special journal which is used for recording all cash receipts and cash payments. It serves a dual purpose: it is both a book of original entry (a journal) and a book of final entry (a ledger). When a business frequently gives or receives cash discounts, it becomes convenient to add a separate column for discount on each side of the simple cash book. This modified cash book is known as a Two-Column Cash Book or Cash Book with Cash and Discount Columns.
Key Concepts of the Two-Column Cash Book
- Debit Side (Receipts): The left-hand side (Dr.) of the cash book records all cash receipts and any cash discount allowed to customers when they make a payment.
- Credit Side (Payments): The right-hand side (Cr.) of the cash book records all cash payments and any cash discount received from suppliers when we make a payment.
- Discount Allowed: This is an expense for the business. It is offered to customers for prompt payment. It is recorded in the discount column on the debit (receipts) side of the cash book.
- Discount Received: This is an income for the business. It is received from suppliers for making prompt payments. It is recorded in the discount column on the credit (payments) side of the cash book.
Distinction: Cash Discount vs. Trade Discount
It is crucial to remember that only Cash Discount is recorded in the books of accounts, specifically in the discount column of the cash book. Trade Discount is a reduction in the list price of goods, allowed by a seller to a buyer. It is not recorded in the books; transactions are recorded at the net amount (List Price minus Trade Discount).
Format of a Two-Column Cash Book
The format includes columns for Date, Particulars, Ledger Folio (L.F.), Discount, and Cash on both the debit and credit sides.
| Date | Particulars | L.F. | Discount (Rs.) | Cash (Rs.) | Date | Particulars | L.F. | Discount (Rs.) | Cash (Rs.) |
|---|---|---|---|---|---|---|---|---|---|
| (Receipts) | (Allowed) | (Payments) | (Received) |
Posting and Balancing
- The cash columns are balanced like a regular ledger account. The balance (usually debit) is carried forward.
- The discount columns are not balanced. Instead, they are simply totalled.
- The total of the ‘Discount Allowed’ (debit) column is posted to the debit side of the ‘Discount Allowed Account’ in the general ledger.
- The total of the ‘Discount Received’ (credit) column is posted to the credit side of the ‘Discount Received Account’ in the general ledger.
Quick Revision Points
- A two-column cash book has cash and discount columns on both sides.
- The debit side records cash inflows and discounts allowed.
- The credit side records cash outflows and discounts received.
- Discount allowed is an expense; discount received is an income.
- Only cash discount is recorded, not trade discount.
- The discount columns are totalled, not balanced. These totals are then posted to their respective ledger accounts.
Practice Questions
- Journalise the following transaction: Sold goods to Ram for Rs. 10,000 at a 10% trade discount and 2% cash discount. Ram paid the amount immediately.
- What is the treatment for the total of the discount column on the credit side of the cash book?
- Why is a cash book called both a journal and a ledger?
- A business purchased furniture for Rs. 5,000 and paid by cheque. Will this transaction be recorded in the cash book with cash and discount columns? Why or why not?
- Explain the rule of debit and credit as it applies to ‘Discount Allowed’ and ‘Discount Received’ accounts.
