The Cash book

 What is cash book ?

• Is a combined T-account for cash and bank. 
•  Therefore, cash book has a cash column on both debit and credit sides as well as a bank column on each side. 
• On the debit side we record all the money that we received in the business while on the credit side we record all the payments.
• The rule is that all money received by debit card will be entered in the bank column on the debit side, while all the payments made by debit card or EFT will entered in the bank column on the credit side.
• Withdrawals for cash that will be used in the business will be a contra entry, cash will be debited and bank will be credited. 

Types of cash books 

1.  Two column cash book: a two money column cash book only makes provision for cash and bank columns. This type of cash book is practically uncommon since it is only used by the business that don't buy or sell on credit( does not offer/receive cash discounts).
   
   
   
2. Three column cash book: a three money column cash book make provision for discount received from suppliers and discount allowed to the customers.
   
   
   

We have two types of discounts 

1. Cash discounts 
2. Trade discount 

Cash discount is a discount on credit accounts received or provided. Cash discounts is entered in the cash book. 

We also have two types of cash discounts which are; 

1. Discount received: this discount given by Creditors when our business settle the amount on time.
2. Discount allowed: this discount received given by Debtors when he/she settle the account on time.

Trade discount is the reduction on the price of goods thata supplier gives when your business buys goods from them in bulk. Trade discount is not recorded in the books.

Recording transaction in a three columns cash book

There are three important aspects we need to know when recording transactions in the cash book, namely;

1. Are we receiving or paying money? To determine whether it is a debit entry or credit entry.
2. Reason for receiving or paying money? To get the account name to be written at details column.
3. Method of payment used. To determine whether the amount is cash or debit column.

Click on the link to see examples of three column cash book:

https://youtu.be/teyEFxqNLz8?si=NtnmjGQWEJGfsSMp

Good luck!!!