A three-column cash book records receipts on the left (debit) and payments on the right (credit), with a discount column, a cash column and a bank column on each side. It appears whenever a question gives a list of transactions and asks you to write up and balance the cash book.
This skill is the starting point of cash books and petty cash, and it builds directly on choosing debit and credit in double-entry foundations.
What goes in each column?
The cash and bank columns hold money that actually moved. The discount columns hold the settlement discount, which is not money at all, only the amount by which a debt was reduced.
Receipts go on the debit side and payments on the credit side. The discount column on the debit side is discount allowed, given to customers. The discount column on the credit side is discount received, given by suppliers.
How do you enter a transaction, step by step?
- Did money move? If not, it is not a cash book entry.
- Which way? Money in is the left side. Money out is the right side.
- Which column? Notes and coins go in the cash column. Cheques, transfers and cards go in the bank column.
- Was there a discount? Put the discount in the discount column on the same side, and only the money paid or received in the amount column.
- Name the other account in the details column, for example A. Hamid or Wages.
Worked example
Sari Stationery begins March with RM 450 cash and RM 3,200 in the bank.
- 3 March: receives a cheque from A. Hamid for RM 380, settling his RM 400 balance. Discount allowed RM 20.
- 4 March: cash sales RM 290.
- 5 March: pays Lim Trading by cheque RM 760, settling RM 800. Discount received RM 40.
- 6 March: pays wages in cash RM 210.
- 7 March: pays electricity by bank transfer RM 145.
Debit side
| Date | Details | Discount | Cash | Bank |
|---|---|---|---|---|
| 1 Mar | Balance b/d | 450 | 3,200 | |
| 3 Mar | A. Hamid | 20 | 380 | |
| 4 Mar | Sales | 290 | ||
| 20 | 740 | 3,580 |
Credit side
| Date | Details | Discount | Cash | Bank |
|---|---|---|---|---|
| 5 Mar | Lim Trading | 40 | 760 | |
| 6 Mar | Wages | 210 | ||
| 7 Mar | Electricity | 145 | ||
| 7 Mar | Balance c/d | 530 | 2,675 | |
| 40 | 740 | 3,580 |
Check the columns: cash is 450 + 290 = 740 on the debit side, and 210 + 530 = 740 on the credit side. Bank is 3,200 + 380 = 3,580 on the debit side, and 760 + 145 + 2,675 = 3,580 on the credit side.
The balances brought down on 8 March are RM 530 cash and RM 2,675 bank, both on the debit side.
At the end of the period, the RM 20 total goes to the debit of the discount allowed account, and the RM 40 total goes to the credit of the discount received account. A. Hamid’s account is credited with RM 400: RM 380 from the cash book and RM 20 of discount.
The mistake to watch for
A common slip is to write the full RM 400 in the bank column and then add the discount as well.
Mistaken entry: Bank debit 400, discount allowed 20.
The business did not receive RM 400. It received RM 380, so the bank column is overstated by RM 20 and the balance carried down will not match the bank.
The correction is to ask “how much money actually moved?” and write only that amount in the bank column. The discount is the difference between what was owed and what was paid.
Check yourself
1. On which side and in which column is a payment of RM 150 cash for postage recorded?
Show answer
The credit (right) side, in the cash column, as cash credit RM 150. Money went out and it was notes and coins.
2. A customer owes RM 500. He settles by cheque for RM 490, which you bank. What appears in the cash book?
Show answer
Bank debit RM 490 and discount allowed RM 10 on the debit side. The customer’s account is credited RM 500 in total.
3. The cash column totals RM 1,200 on the debit side and RM 845 on the credit side before balancing. What is the balance carried down, and on which side is it brought down?
Show answer
1,200 − 845 = RM 355. It is written on the credit side as balance c/d to make both totals equal, and brought down on the debit side as balance b/d.
Where this leads next
Once the layout feels natural, move on to distinguishing bank and cash movements, then test yourself on the cash books and petty cash practice set. The double-entry and ledger trainer shows where each entry is posted.
If you understand each step but still pick the wrong column under time pressure, that is something our teachers can work through in online one-to-one Accounting tuition.