### ZIMSEC O Level Principles of Accounts Notes: Source Documents: Three Column Cash Book: Discount Received entries simple example

• We have looked at the concept of Discount Received here
• In this topic we will look at entries that can be used to record discount received
• One thing to be wary off is that different suppliers will likely have different discount rates
• Some will likely offer no discount at all
• Be careful to apply the correct discount rate to the corresponding supplier
• Below is an example exercise and solution of the entries:

• The following transactions took place during the first month of A Moyo’s business:
• 1 Jan Started the business with 5000 cash
• 3 Jan deposited 4000 into the bank
• 5 Jan bought goods worth 500 on credit from R Matingo
• 7 Jan bought goods worth 1000 on credit from P Hatizivi
• 17 Jan paid the amount using cash owing to R Matingo and received a 10% discount
• 29 Jan paid the amount owing to P Hatizivi using a bank transfer and received 5% discount
• No other transactions took place during the month

Required:

1. Show the double entries to be made in the Cash Book, Creditor’s Ledger/Purchases Ledger and General Ledger if the business uses a two column Cash Book
2. Show the double entries to be made in theÂ the Cash Book, Creditor’s Ledger/Purchases Ledger and General Ledger if the business uses a two column Cash Book

NB Do not show the Profit and Loss Account. We are also assuming that A Moyo’s accounting/trading period is one month long

1) Solution when using the two column Cash Book

 Purchases(Creditor's) Ledger DR R Matingo Account CR Date Details Amount(\$) Date Details Amount(\$) 17 Jan Cash 450 1 Jan Purchases 500 17 Jan Discount 50 500 500 P Hatizivi Account Date Details Amount(\$) Date Details Amount(\$) 29 Jan Bank 950 7 Jan Purchases 1000 29 Jan Discount 50 1000 1000 Cash Book DR CR Date Details Cash(\$) Bank(\$) Date Details Cash(\$) Bank(\$) 1 Jan Capital 5000 3 Jan Bank 4000 3 Jan Cash 4000 17 Jan R Matingo 450 29 Jan P Hatizivi 950 31 Jan Balance c/d 550 3050 5000 4000 5000 4000 General Ledger Discount Received Account Date Details Amount(\$) Date Details Amount(\$) 31 Jan Profit and Loss 100 17 Jan R Matingo 50 29 Jan P Hatizivi 50 100 100

2) Solution when using a three column Cash Book

 Purchases(Creditor's) Ledger DR R Matingo Account CR Date Details Amount(\$) Date Details Amount(\$) 17 Jan Cash 450 1 Jan Purchases 500 17 Jan Discount 50 500 500 P Hatizivi Account Date Details Amount(\$) Date Details Amount(\$) 29 Jan Bank 950 7 Jan Purchases 1000 29 Jan Discount 50 1000 1000 Cash Book DR CR Date Details Discount(\$) Cash(\$) Bank(\$) Date Details Discount(\$) Cash(\$) Bank(\$) 1 Jan Capital 5000 3 Jan Bank 4000 3 Jan Cash 4000 17 Jan R Matingo 50 450 29 Jan P Hatizivi 50 950 31 Jan Balance c/d 550 3050 --- 5000 4000 100 5000 4000 General Ledger Discount Received Account Date Details Amount(\$) Date Details Amount(\$) 31 Jan Profit and Loss 100 31 Jan Total for the month 100
• This is a simple example showing only Discount Received
• In real life Discount Allowed is involved as well