Double Column Cash Book (With Discount)
While the Cash and Bank format is the most common, businesses often need to track the discounts they give to customers or receive from suppliers. To do this efficiently, they use a Double Column Cash Book that pairs the primary liquid asset (either Cash or Bank) with a Discount column.
This results in two important variations:
- Cash & Discount Columns
- Bank & Discount Columns
1. Understanding the Discount Column
Before preparing these books, it is crucial to understand the nature of the Discount column. It behaves very differently than the Cash or Bank columns.
Trade Discount vs. Cash Discount
- Trade Discount: A reduction in catalog price given to bulk buyers (e.g., "10% off for buying 100 units"). Trade discounts are never recorded in the books of accounts. You simply deduct the amount from the invoice price before recording the transaction.
- Cash Discount: An incentive offered to encourage prompt payment (e.g., "Pay within 7 days and get 2% off"). Cash discounts are recorded in the books. This is the exact discount we track in the Cash Book.
The Accounting Rule of Discounts
The Discount columns are nominal accounts, meaning they follow the golden rule: Debit all expenses and losses, Credit all incomes and gains.
- Debit Side (Discount Allowed): When you receive cash from a customer, you might allow them a discount to settle early. This is a loss/expense for your business. Therefore, the Discount column on the Debit (Receipts) side represents Discount Allowed.
- Credit Side (Discount Received): When you pay cash to a supplier, they might allow you a discount. This is a gain/income for your business. Therefore, the Discount column on the Credit (Payments) side represents Discount Received.
⚠️ The Golden Rule of Totaling Discounts:
Unlike Cash or Bank columns, the Discount columns are never balanced against each other. You do not find the difference to carry forward. Instead, you simply total each column independently at the end of the month.
Unlike Cash or Bank columns, the Discount columns are never balanced against each other. You do not find the difference to carry forward. Instead, you simply total each column independently at the end of the month.
2. Type 1: Cash & Discount Columns
This format is used by businesses that deal primarily in physical cash but actively use cash discounts to settle accounts quickly.
📝 Practical Question 1
Prepare a Cash Book with Cash and Discount columns for August 2026:
- Aug 01: Opening Cash Balance Rs. 25,000.
- Aug 05: Sold goods for cash Rs. 10,000.
- Aug 10: Received cash from customer Rahul Rs. 4,800 in full settlement of his account of Rs. 5,000.
- Aug 15: Paid cash to supplier Priya Rs. 2,900 and received a discount of Rs. 100.
- Aug 20: Paid wages Rs. 3,000.
- Aug 25: Settled a debt of Rs. 8,000 with Vikram by paying cash of Rs. 7,800.
Step-by-Step Logic
Aug 01: Debit side ➔
To Balance b/d ➔ Cash: 25,000.Aug 05: Cash comes in. Debit side ➔
To Sales A/c ➔ Cash: 10,000.Aug 10: Rahul owed 5k. Paid 4.8k. We lost 200 as discount. Debit side ➔
To Rahul's A/c ➔ Cash: 4,800 | Discount: 200.Aug 15: Paid Priya 2.9k, gained 100 discount. Credit side ➔
By Priya's A/c ➔ Cash: 2,900 | Discount: 100.Aug 20: Cash goes out. Credit side ➔
By Wages A/c ➔ Cash: 3,000.Aug 25: Owed Vikram 8k. Paid 7.8k. Gained 200. Credit side ➔
By Vikram's A/c ➔ Cash: 7,800 | Discount: 200.Aug 31 (Balancing): Cash column balances to 26,100 (Cr. side). Discount columns are just totaled (Dr: 200, Cr: 300).
Solution 1: Cash & Discount Table
| Dr. (Receipts) | Cr. (Payments) | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Date | Particulars | L.F. | Disc. (Rs.) | Cash (Rs.) | Date | Particulars | L.F. | Disc. (Rs.) | Cash (Rs.) |
| Aug 01 | To Balance b/d | - | 25,000 | Aug 15 | By Priya's A/c | 100 | 2,900 | ||
| Aug 05 | To Sales A/c | - | 10,000 | Aug 20 | By Wages A/c | - | 3,000 | ||
| Aug 10 | To Rahul's A/c | 200 | 4,800 | Aug 25 | By Vikram's A/c | 200 | 7,800 | ||
| Aug 31 | By Balance c/d | - | 26,100 | ||||||
| TOTAL | 200 | 39,800 | TOTAL | 300 | 39,800 | ||||
| Sep 01 | To Balance b/d | 26,100 | |||||||
3. Type 2: Bank & Discount Columns
This format is used by modern businesses where almost all transactions (receipts and payments) happen through the bank via cheques, NEFT, RTGS, or online transfers, and they actively use cash discounts.
📝 Practical Question 2 (Including Dishonour)
Prepare a Bank & Discount Cash Book for September 2026:
- Sep 01: Opening Bank Balance Rs. 60,000.
- Sep 04: Received a cheque from customer Suresh for Rs. 19,000 in full settlement of his Rs. 20,000 debt. (Assume deposited same day).
- Sep 09: Issued a cheque to supplier Neha for Rs. 9,500. She allowed a discount of Rs. 500.
- Sep 15: Received a cheque from Mohan for Rs. 14,800 and allowed him a discount of Rs. 200.
- Sep 20: Paid electricity bill by cheque Rs. 2,000.
- Sep 25: Mohan's cheque (received on Sep 15) was dishonoured (bounced) by the bank.
Step-by-Step Logic
Sep 01: Debit side ➔
To Balance b/d ➔ Bank: 60,000.Sep 04: Received 19k, lost 1k discount. Debit side ➔
To Suresh's A/c ➔ Bank: 19,000 | Discount: 1,000.Sep 09: Paid 9.5k, gained 500 discount. Credit side ➔
By Neha's A/c ➔ Bank: 9,500 | Discount: 500.Sep 15: Received 14.8k, lost 200 discount. Debit side ➔
To Mohan's A/c ➔ Bank: 14,800 | Discount: 200.Sep 20: Expense paid via bank. Credit side ➔
By Electricity A/c ➔ Bank: 2,000.
Sep 25 (Bounced Cheque & Reversed Discount): This is tricky! Mohan's cheque bounced. We must reverse the bank receipt (14,800). We must also reverse the discount allowed (200) because he didn't actually pay us, so he loses the discount privilege. Credit side ➔
By Mohan's A/c ➔ Bank: 14,800 | Discount: 200.
Sep 30 (Balancing): Bank column balances to 67,500 (Cr. side). Discount columns are totaled independently (Dr: 1,200, Cr: 700).
Solution 2: Bank & Discount Table
| Dr. (Receipts) | Cr. (Payments) | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Date | Particulars | L.F. | Disc. (Rs.) | Bank (Rs.) | Date | Particulars | L.F. | Disc. (Rs.) | Bank (Rs.) |
| Sep 01 | To Balance b/d | - | 60,000 | Sep 09 | By Neha's A/c | 500 | 9,500 | ||
| Sep 04 | To Suresh's A/c | 1,000 | 19,000 | Sep 20 | By Electricity A/c | - | 2,000 | ||
| Sep 15 | To Mohan's A/c | 200 | 14,800 | Sep 25 | By Mohan's A/c (Bounce) | 200 | 14,800 | ||
| Sep 30 | By Balance c/d | - | 67,500 | ||||||
| TOTAL | 1,200 | 93,800 | TOTAL | 700 | 93,800 | ||||
| Oct 01 | To Balance b/d | 67,500 | |||||||