ZIMSEC O Level Principles of Accounts Notes: Source Documents: Three Column Cash Book: Discount Allowed Example

  • We have already looked at Discount Allowed here
  • Here we will look at a simple example in order to look at the entries you need to make
  • We sold goods worth $500 to J Chimusoro on credit on 8 January
  • On January 12 we sold goods worth 1000 on credit R Mabasa
  • Chimusoro settles his account by making an RTGS deposit into our bank account on 3 February
  • On 16 February R Mabasa made a $900 cash payment to settle her account
  • What would be the entries in the books if:
    1. Our business does not have a cash discount policy in place
    2. Our business offers a Cash Discount of 10% if an account is settled within 3 months

Solution

a) Assuming that no other transactions took place without discount the following entries would be made in the books

Sales(Debtor's) Ledger
DRJ Chimusoro AccountCR
DateDetailsAmount($)DateDetailsAmount($)
8 JanSales

500

2 FebBank

500

R Mabasa Account
DateDetailsAmount($)DateDetailsAmount($)
12 JanSales

1000

16 FebCash

1000

Cash Book
DRCR
DateDetailsCash($)Bank($)DateDetailsCash($)Bank ($)
2 FebJ Chimusoro50031 DecBalance c/d1000500
16 FebR Mabasa1000

1000

500

1000

500

b) With discount in a normal two column Cash Book the entries would be:

Sales(Debtor's) Ledger
DRJ Chimusoro AccountCR
DateDetailsAmount($)DateDetailsAmount($)
8 JanSales5002 FebBank450
2 FebDiscount50

500

500

R Mabasa Account
DateDetailsAmount($)DateDetailsAmount($)
12 JanSales100016 FebCash900
16 FebDiscount100

1000

1000

Cash Book
DRCR
DateDetailsCash($)Bank($)DateDetailsCash($)Bank ($)
2 FebJ Chimusoro45031 DecBalance c/d900450
16 FebR Mabasa900

900

450

900

450

General Ledger
Discount Allowed Account
DateDetailsAmount($)DateDetailsAmount($)
2 FebJ Chimusoro5031 DecProfit and Loss Account150
16 FebR Mabasa100

150

150

c) If we use the three column Cash Book Instead the entries would be:

Sales(Debtor's) Ledger
DRJ Chimusoro AccountCR
DateDetailsAmount($)DateDetailsAmount($)
8 JanSales5002 FebBank450
2 FebDiscount50

500

500

R Mabasa Account
DateDetailsAmount($)DateDetailsAmount($)
12 JanSales100016 FebCash900
16 FebDiscount100

1000

1000

Cash Book
DRCR
DateDetailsDiscount($)Cash($)Bank($)DateDetailsDiscount($)Cash($)Bank($)
2 FebJ Chimusoro5045031 DecBalance c/d900450
16 FebR Mabasa100900

150

900

450

---

900

450

General Ledger
Discount Allowed Account
DateDetailsAmount($)DateDetailsAmount($)
31 DecTotal for the year

150

31 DecProfit and Loss Account

150

  • Real examination and exercise scenarios are likely to be more complicated than this

To access more topics go to the Principles of Accounts Notes.

- See latest Zimbabwe grocery prices -

Deals

SEE LATEST SUPERMARKET PRICES, SHOP FOR GROCERIES VIA WHATSAPP
SEE PRICES & NEWS
We publish the latest grocery prices from Zimbabwean supermarkets. We also deliver groceries online

Quick NetOne, Telecel, Africom, And Econet Airtime Recharge

If anything goes wrong, click here to enter your query.