HOW TO PREPARE DOUBLE COLUMN CASH BOOK?

Welcome back! Last time we learned to prepare simple cash book, today I’ m going to teach you about Double column cash book.

WHAT IS DOUBLE COLUMN CASH BOOK?

This cash book is an extension of Simple cash book. Under this method an additional column is provided both on debit side and credit side for recording discount allowed and discount received. It is also called as Two column cash book.

Points to be noted while preparing double column cash book:

1. When Cash in hand /opening cash balance is given, it should first Debited as To Balance B/d.
2. Cash discount allowed by the trader to his debtor is a loss to him and is called Discount Allowed and is recorded on debit side of cash book.
3. Whereas Cash discount received by him from his creditor is gain and is known as Discount Received and is recorded on credit side of the cash book.
4. However, cash discount should not be confused with trade discount.
5. Trade Discount is an allowance made by manufacturer or wholesaler to retailer off the catalogue price of goods sold. Trade discount is deducted from price and balance is recorded in books of accounts. But there is no entry for trade discount separately in books of accounts.
6. Actual cash received will be entered in cash column and discount allowed to customer is entered in discount allowed column of debit side.
7. Similarly actual cash paid will be entered in cash column and discount received will enter in discount received column of credit side.
8. While balancing both sides, only cash columns are balanced but discount columns are not balance. They are merely totaled and posted in discount account.

A double column cash book is ruled as follows:

 Example problem

EXPLANATION: let me first explain the problem:
On June 1  cash in hand is the opening balance which is brought down from the last month – cash is coming in the business – so debited to cash book – as To Balance b/d.
On June 3 cash is received from Mohan – cash is coming in the business – so debited to cash book – as To Mohan A/c.
On June 5 cash paid to Sohan – cash is going out of the business – so credited to cash book – as By Sohan A/c.
On June 8 cash is paid to Ramgopal and discount is received from him - cash is going out of the business so credited to cash book -  as By Ramgopal A/c. Actual amount paid will be written in cash column (i.e. 290) and discount amount is written in discount received column (i.e. 10) on credit side of cash book.
On June 9 goods are purchased from Ashok for cash – cash is going out of the business – so credited to cash book – as By Purchase A/c.
On June 10 cash is paid to Mukesh – cash is going out of the business – so credited to cash book – as By Mukesh A/c.
On June 11 cash is received from Gupta and discount is allowed by him – cash is coming in business – so debited to cash book – as To Gupta. Actual amount received will be written in cash column (i.e. 980) and discount amount is written in discount allowed column (i.e. 20) on debit side of cash book.
On June 15 sales for cash – cash is coming in the business – so debited in cash book – as To Sales A/c.
On June 21 cash paid to Mohanlal Tiwari and discount is given – cash is going out of the business – so credited to cash book – as By Mohanlal Tiwari A/c. Actual amount paid will be written in cash column (i.e.725) and here discount means discount received from Mohanlal Tiwari, that will be written in discount received column (i.e. 25) on debit side of cash book.
On June 23 paid wages – cash is going out of the business – so credited to cash book – as By Wages A/c.
On June 28 Received commission from Uday – cash is coming into business – so debited to cash book – as To Commission A/c. we will not write person’s name for expenses and incomes accounts.
On June 29 paid to Naresh and only discount is given– cash is going out of the business – so credited to cash book – as By Naresh A/c. here discount means discount received from Naresh, that will be written in discount received column (i.e. 20) on debit side of cash book.
On June 30 received interest – cash is coming in to business – so debited to cash book – as To Interest A/c.

Here’s, how the cash book will be like:

Note: At the end of the month both sides’ cash columns are balanced and discount columns are totaled.  Here we found debit side total is more than credit side total; there is a difference of 5,685 so balance amount is written on credit side as By Balance c/d which is brought forward to the next month as To Balance B/d amounting 5,685.

When cash transactions are entered in the cash book, only one aspect of cash transactions is recorded.☝️ To complete the double entry of cash transactions, 📖all items appearing in the cash book should be posted to the respective ledger accounts.

All the items (except the opening cash balance) appearing on the debit side of the cash book have to be posted to the credit side of the respective ledger accounts as “By Cash A/c”. All the items (except the closing cash balance) appearing on the credit side of the Cash book have to be posted to the debit side of the respective ledger account as “To Cash A/c”. 
When cash is received from a person and some discount is allowed to him, the person’s account must be credited with both cash received and also discount allowed by writing By cash and By Discount. Example, on June 11cash is received from Gupta of Rs. 980 and discount allowed to him of Rs. 20. So Gupta account is opened and is credited twice as By Cash 980 and By Discount 20.
 In a similar way when cash is paid to some person discount is allowed by him, the person’s account must be debited as To cash and To discount. Example, on June 8 cash paid to Ramgopal of Rs. 290 and discount is received from him of Rs. 10. So Ramgopal account is debited twice as To cash 290 and To discount 10.

As I said earlier, totals of discount allowed and discount received columns should be debited and credited respectively in Discount Account to complete double entry. 

Now let me give you one☝️ (DIY) for your practice✍ let’s see how you will do! 🤔Well I have shared my knowledge with you let’s see did you gained that knowledge?🤷‍♀️

DO IT YOURSELF (DIY):

Next time I will teach you how to prepare triple/three column cash book? (i.e. with a Discount, Cash, and Bank column).

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