Prepare a Three Column Cash Book from the following transactions: March 1: Started business with cash. March 2: Deposited in State Bank of India. March 3: Received Cash from Ram, A... Prepare a Three Column Cash Book from the following transactions: March 1: Started business with cash. March 2: Deposited in State Bank of India. March 3: Received Cash from Ram, Allowed him discount. March 4: Settled Banshidhar's account for ₹500 by cheque for ₹480. March 8: Withdraw from Bank for personal use. March 12: Deposited into Bank. March 15: Purchased goods and paid by cheque. March 20: Received cheque from Saxena, Allowed him discount. March 24: Sold goods and received cheque, Allowed discount. March 26: Withdraw Cash from bank for office use. March 28: Paid Banerjee cash, Received discount from him. March 29: Cash Sales. March 30: Paid Salaries in cash, Bank charges.

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Understand the Problem

The question is asking to prepare a Three Column Cash Book for the transactions listed for March 2016. This involves organizing cash transactions, bank transactions, and discounts into a structured format, typically used in accounting.

Answer

The Cash Book entries for March 2016 total to Cash: $7026$, Bank: $1960$, and Discounts: $80$.
Answer for screen readers

Here’s a simplified Three Column Cash Book for March 2016:

Date Particulars Cash Bank Discount
Mar 1 Started business 6000 0 0
Mar 2 Deposited in State Bank 0 5500 0
Mar 3 Received Cash from Ram 1560 0 40
Mar 4 Settled Banshidhar's cheque 0 -480 0
Mar 8 Withdrawn for Personal Use 1000 0 0
Mar 12 Deposited into Bank 0 1000 0
Mar 15 Purchased goods -800 0 0
Mar 20 Received cheque from Saxena 0 980 20
Mar 24 Sold goods 685 0 15
Mar 26 Withdraw Cash from Bank 1200 0 0
Mar 28 Paid Banerjee cash -595 0 5
Mar 29 Cash Sales 600 0 0
Mar 30 Paid Salaries in Cash -100 0 0
Mar 30 Bank Charges 0 -10 0

Total Cash: 7026, Total Bank: 1960, Total Discounts: 80

Steps to Solve

  1. Set Up the Cash Book Structure
    Create a three-column cash book format with the following headings: Date, Particulars, Cash, Bank, and Discount. The cash column records cash transactions, the bank column records bank transactions, and the discount column records any discounts allowed.

  2. Input Initial Balances
    On March 1, record the starting business cash.

  • Date: Mar 1
  • Particulars: Started business
  • Cash: 6000
  • Bank: 0
  • Discount: 0
  1. Record Transactions
    Proceed to fill in each transaction for March one by one based on the provided data.
    For example, on March 2, deposit into the bank:
  • Date: Mar 2
  • Particulars: Deposited in State Bank of India
  • Cash: 0
  • Bank: 5500
  • Discount: 0
    Continue this for all the transactions.
  1. Calculate Discounts
    Where discounts are allowed (e.g., March 3, March 20, and March 24), record them in the discount column.
    For example, on March 3:
  • Date: Mar 3
  • Particulars: Received cash from Ram
  • Cash: 1560
  • Bank: 0
  • Discount: 40
  1. Complete the Cash Book
    Finalise the entries by checking each transaction and summing the values in the Cash, Bank, and Discount columns.

  2. Final Calculation
    At the end of the cash book, calculate the total cash, total bank deposits, and total discounts allowed for the month.

Here’s a simplified Three Column Cash Book for March 2016:

Date Particulars Cash Bank Discount
Mar 1 Started business 6000 0 0
Mar 2 Deposited in State Bank 0 5500 0
Mar 3 Received Cash from Ram 1560 0 40
Mar 4 Settled Banshidhar's cheque 0 -480 0
Mar 8 Withdrawn for Personal Use 1000 0 0
Mar 12 Deposited into Bank 0 1000 0
Mar 15 Purchased goods -800 0 0
Mar 20 Received cheque from Saxena 0 980 20
Mar 24 Sold goods 685 0 15
Mar 26 Withdraw Cash from Bank 1200 0 0
Mar 28 Paid Banerjee cash -595 0 5
Mar 29 Cash Sales 600 0 0
Mar 30 Paid Salaries in Cash -100 0 0
Mar 30 Bank Charges 0 -10 0

Total Cash: 7026, Total Bank: 1960, Total Discounts: 80

More Information

A three-column cash book is essential for tracking cash, bank, and discount transactions in a systematic way. This helps in maintaining clear records for accounting and financial statements.

Tips

  • Failing to categorize transactions correctly into cash, bank, or discount.
  • Not recording the negative entries (expenses) properly.
  • Forgetting to sum up the total amounts in each column at the end.
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