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: Withdrew 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: Withdrew 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.
Understand the Problem
The question is asking to prepare a three-column cash book based on a series of transactions that took place in March 2016. This requires organizing the cash in-hand, bank transactions, and any discounts allowed or received in a structured format.
Answer
Total Cash: ₹17,640; Total Bank: ₹7,500; Total Discounts: ₹165.
Answer for screen readers
| Date | Cash | Bank | Discount Allowed/Received |
|---|---|---|---|
| Mar 1 | 6,000 | ||
| Mar 2 | 5,500 | ||
| Mar 3 | 1,560 | 40 | |
| Mar 4 | |||
| Mar 8 | 1,000 | ||
| Mar 12 | 1,000 | ||
| Mar 15 | |||
| Mar 20 | 20 | ||
| Mar 24 | 15 | ||
| Mar 26 | 1,000 | ||
| Mar 28 | 800 | 5 | |
| Mar 29 | 980 | ||
| Mar 30 | 600 | 100 |
Total Cash: ₹17,640
Total Bank: ₹7,500
Total Discounts Allowed: ₹165
Steps to Solve
- Set Up the Cash Book Structure
Create a three-column cash book with the following headings:
| Date | Cash | Bank | Discount Allowed/Received |
- Record Initial Cash Balance
On March 1, the business starts with cash of ₹6,000. Enter this in the cash column.
| Date | Cash | Bank | Discount Allowed/Received |
|---|---|---|---|
| Mar 1 | 6,000 |
- Record Transactions Sequentially
Enter each transaction one by one, updating the cash, bank, and discount columns accordingly. For example:
- Mar 2: Deposit of ₹5,500 into the bank.
- Mar 3: Received cash of ₹1,560 from Ram and allowed him a discount of ₹40.
Continue this process for all transactions:
- Mar 1: Start with cash ₹6,000.
- Mar 2: Bank = ₹5,500.
- Mar 3: Cash = ₹1,560, Discount = ₹40.
- Adjust Cash and Bank Balances
For each transaction, add or subtract amounts from the cash and bank columns. For discounts given, include them under discount received or allowed.
- Final Balancing
After recording all transactions, ensure the totals for cash, bank, and discounts are calculated. The final balances will provide the closing positions for cash and bank accounts.
- Total Calculations
Make sure to sum up the cash, bank, and discount columns to show the accurate totals at the bottom of the cash book.
| Date | Cash | Bank | Discount Allowed/Received |
|---|---|---|---|
| Mar 1 | 6,000 | ||
| Mar 2 | 5,500 | ||
| Mar 3 | 1,560 | 40 | |
| Mar 4 | |||
| Mar 8 | 1,000 | ||
| Mar 12 | 1,000 | ||
| Mar 15 | |||
| Mar 20 | 20 | ||
| Mar 24 | 15 | ||
| Mar 26 | 1,000 | ||
| Mar 28 | 800 | 5 | |
| Mar 29 | 980 | ||
| Mar 30 | 600 | 100 |
Total Cash: ₹17,640
Total Bank: ₹7,500
Total Discounts Allowed: ₹165
More Information
The cash book provides a detailed overview of cash inflows and outflows, bank deposits, and discounts allowed or received during March 2016. This organized format aids in financial tracking and accountability.
Tips
- Forgetting to update the cash and bank balances after each transaction.
- Misclassifying discounts as income instead of recording them properly in the discount column.
