Three-Column Cash Book: Cash, Bank, and Discount Columns Explained

A three-column cash book looks busy at first.

There are cash columns, bank columns, discount columns, debit side, credit side, contra entries, cheque entries, and balances to carry down. It can feel like one small mistake will shift the whole answer.

But the topic becomes much easier when you understand one simple idea:

The three-column cash book is not three different books. It is one book that records cash transactions, bank transactions, and cash discounts in one organised place.

This blog will help you understand the cash column, bank column, and discount column step by step, with examples and the mistakes students should avoid.

What a Three-Column Cash Book Means

A three-column cash book is a cash book with three amount columns on each side:

Side	Column 1	Column 2	Column 3
Debit side	Discount	Cash	Bank
Credit side	Discount	Cash	Bank

The debit side records money coming in.

The credit side records money going out.

The cash column records cash received and cash paid.

The bank column records money received through bank and money paid through bank.

The discount column records cash discount allowed and cash discount received.

Why the Three-Column Cash Book Is Useful

In real business, not every receipt and payment happens in cash. Many transactions happen through bank. Also, businesses often allow or receive small discounts when accounts are settled early or in full.

Without a three-column cash book, the same transaction may need separate entries in different places.

For example:

Transaction	What may be involved
Received cash from a customer with discount	Cash and discount allowed
Paid a supplier by cheque with discount	Bank and discount received
Deposited cash into bank	Cash and bank
Withdrew cash from bank for office use	Bank and cash

The three-column cash book brings all of this into one format.

It saves time, reduces repetition, and makes cash and bank balances easier to track.

The Basic Format

A simple three-column cash book looks like this:

Debit Side				Credit Side
Particulars	Discount	Cash	Bank	Particulars	Discount	Cash	Bank
Receipts are recorded here	Discount allowed	Cash received	Bank receipts	Payments are recorded here	Discount received	Cash paid	Bank payments

The debit side is for receipts.

The credit side is for payments.

That rule is the starting point for almost every question.

The Cash Column

The cash column records physical cash.

Use the debit side cash column when cash is received.

Use the credit side cash column when cash is paid.

Transaction	Side	Column
Cash sales	Debit side	Cash column
Cash received from debtor	Debit side	Cash column
Cash paid to creditor	Credit side	Cash column
Cash purchases	Credit side	Cash column
Cash paid for rent, wages, or expenses	Credit side	Cash column

For example, if goods are sold for cash Rs. 5,000, the entry goes on the debit side in the cash column.

Particulars	Discount	Cash	Bank
Sales A/c		Rs. 5,000

If rent is paid in cash Rs. 2,000, the entry goes on the credit side in the cash column.

Particulars	Discount	Cash	Bank
Rent A/c		Rs. 2,000

The Bank Column

The bank column records transactions made through the bank.

Use the debit side bank column when money increases in the bank.

Use the credit side bank column when money decreases in the bank.

Transaction	Side	Column
Cheque received and deposited into bank	Debit side	Bank column
Cash deposited into bank	Debit side	Bank column and credit side cash column
Payment made by cheque	Credit side	Bank column
Bank charges	Credit side	Bank column
Interest credited by bank	Debit side	Bank column

For example, if a cheque of Rs. 8,000 is received from a customer and deposited into bank, the entry goes on the debit side in the bank column.

Particulars	Discount	Cash	Bank
Customer’s A/c			Rs. 8,000

If a supplier is paid by cheque Rs. 6,000, the entry goes on the credit side in the bank column.

Particulars	Discount	Cash	Bank
Supplier’s A/c			Rs. 6,000

The Discount Column

The discount column is the part that confuses many students.

The most important point is this:

There are two different discounts in a three-column cash book.

Type of discount	Meaning	Where it appears
Discount allowed	Discount given to a customer or debtor	Debit side discount column
Discount received	Discount received from a supplier or creditor	Credit side discount column

This may look strange at first because discount allowed is an expense, while the debit side of the cash book is usually for receipts.

But remember what is happening in the transaction.

When a debtor pays you less than the full amount because you allow discount, you still need to close the debtor’s account fully. The cash received goes into the cash or bank column, and the discount allowed goes in the discount column on the same debit side.

Discount Allowed

Suppose Rohan owes Rs. 5,000. He pays Rs. 4,900 in cash in full settlement.

The business has allowed discount of Rs. 100.

The entry in the cash book will be:

Debit Side Particulars	Discount	Cash	Bank
Rohan	Rs. 100	Rs. 4,900

This tells us:

• cash received is Rs. 4,900
• discount allowed is Rs. 100
• Rohan’s account will be credited by Rs. 5,000 in total

The discount allowed is written on the debit side because it belongs to the same receipt transaction.

Discount Received

Now suppose the business owes Meera Traders Rs. 3,000. It pays Rs. 2,950 by cheque in full settlement.

The business has received discount of Rs. 50.

The entry in the cash book will be:

Credit Side Particulars	Discount	Cash	Bank
Meera Traders	Rs. 50		Rs. 2,950

This tells us:

• bank payment is Rs. 2,950
• discount received is Rs. 50
• Meera Traders’ account will be debited by Rs. 3,000 in total

The discount received is written on the credit side because it belongs to the same payment transaction.

Cash Discount vs Trade Discount

This is a very common trap.

The discount column is for cash discount, not trade discount.

Cash discount is given for early payment or full settlement. It is recorded in the books.

Trade discount is a reduction in list price at the time of sale or purchase. It is not recorded separately in the cash book.

Type	When it is given	Recorded separately?
Trade discount	At the time of sale or purchase	No
Cash discount	At the time of payment or settlement	Yes

For example, if goods with list price Rs. 10,000 are sold at 10% trade discount for cash, the cash sale is recorded at Rs. 9,000. The trade discount of Rs. 1,000 is not written in the discount column.

But if a debtor owing Rs. 10,000 pays Rs. 9,800 in full settlement, the Rs. 200 is cash discount allowed and is recorded in the discount column.

Contra Entries in a Three-Column Cash Book

A contra entry is an entry that affects both cash and bank columns of the same cash book.

The word “contra” simply means the double entry is completed inside the cash book itself.

The two most common contra entries are:

Transaction	Debit side	Credit side
Cash deposited into bank	Bank column	Cash column
Cash withdrawn from bank for office use	Cash column	Bank column

Suppose cash Rs. 7,000 is deposited into bank.

The business has less cash, but more bank balance.

So the entry is:

Debit Side Particulars	Discount	Cash	Bank
Cash A/c			Rs. 7,000

And on the credit side:

Credit Side Particulars	Discount	Cash	Bank
Bank A/c		Rs. 7,000

In the ledger folio column, students usually write “C” to show it is a contra entry.

Now suppose cash Rs. 2,000 is withdrawn from bank for office use.

The business has more cash, but less bank balance.

So the entry is:

Debit Side Particulars	Discount	Cash	Bank
Bank A/c		Rs. 2,000

And on the credit side:

Credit Side Particulars	Discount	Cash	Bank
Cash A/c			Rs. 2,000

How to Treat Cheques

Cheque treatment depends on the wording of the question.

If the question says a cheque is received and deposited into bank on the same day, use the bank column on the debit side.

If the question says payment is made by cheque, use the bank column on the credit side.

If the question says a cheque is received but deposited later, follow the method expected in your class. Many school-level questions record the receipt first and then record the later deposit as a transfer into bank.

The safest habit is to underline the exact words:

Wording in question	Usual treatment
Received cheque and deposited into bank	Debit side bank column
Paid by cheque	Credit side bank column
Deposited cash into bank	Contra entry
Withdrew cash from bank for office use	Contra entry
Bank charged commission	Credit side bank column
Bank credited interest	Debit side bank column

A Complete Mini Example

Prepare the three-column cash book entries for the following transactions:

Date	Transaction
April 1	Started business with cash Rs. 20,000 and bank Rs. 30,000
April 3	Cash sales Rs. 6,000
April 5	Deposited cash into bank Rs. 10,000
April 7	Received from Anil Rs. 4,850 in cash and allowed discount Rs. 150
April 10	Paid by cheque to Neha Rs. 7,800 and received discount Rs. 200
April 12	Withdrew cash from bank for office use Rs. 3,000
April 15	Paid office expenses in cash Rs. 1,200
April 20	Bank charged commission Rs. 300

Step 1: Place Opening Balances

Opening cash and bank balances are written on the debit side as “Balance b/d”.

Debit Side Particulars	Discount	Cash	Bank
Balance b/d		Rs. 20,000	Rs. 30,000

Step 2: Record Receipts

Cash sales increase cash.

Receipt from Anil increases cash and includes discount allowed.

Debit Side Particulars	Discount	Cash	Bank
Sales A/c		Rs. 6,000
Anil	Rs. 150	Rs. 4,850

Step 3: Record Bank Increase Through Contra Entry

Cash deposited into bank increases bank and decreases cash.

Debit side:

Debit Side Particulars	Discount	Cash	Bank
Cash A/c			Rs. 10,000

Credit side:

Credit Side Particulars	Discount	Cash	Bank
Bank A/c		Rs. 10,000

Step 4: Record Payments and Discount Received

Payment to Neha is made by cheque, so bank decreases. Discount received is written on the credit side discount column.

Credit Side Particulars	Discount	Cash	Bank
Neha	Rs. 200		Rs. 7,800

Office expenses paid in cash reduce cash.

Bank commission reduces bank.

Credit Side Particulars	Discount	Cash	Bank
Office Expenses A/c		Rs. 1,200
Bank Charges A/c			Rs. 300

Step 5: Record Cash Withdrawn From Bank

Cash withdrawn from bank for office use increases cash and decreases bank.

Debit side:

Debit Side Particulars	Discount	Cash	Bank
Bank A/c		Rs. 3,000

Credit side:

Credit Side Particulars	Discount	Cash	Bank
Cash A/c			Rs. 3,000

Balancing the Three-Column Cash Book

At the end of the period, the cash and bank columns are balanced.

The discount columns are not balanced like cash and bank.

Let us understand this clearly.

Cash Column

Add the debit side cash column.

Add the credit side cash column.

If the debit side is bigger, the difference is cash balance carried down.

Cash balance is normally a debit balance because a business cannot pay more physical cash than it has.

Bank Column

Add the debit side bank column.

Add the credit side bank column.

If the debit side is bigger, there is a favourable bank balance.

If the credit side is bigger, there is a bank overdraft.

Bank column result	Meaning
Debit total greater than credit total	Bank balance
Credit total greater than debit total	Bank overdraft

Discount Columns

The discount columns are totalled, but they are not balanced and carried down.

The total of the debit side discount column is posted to Discount Allowed Account.

The total of the credit side discount column is posted to Discount Received Account.

Posting to Ledger Accounts

Because the cash book is also a book of original entry, entries from it must be posted to ledgers.

But cash and bank accounts are already represented by the cash book. So separate cash account and bank account are usually not prepared again.

Here is the simple posting logic:

Cash book item	Ledger posting
Debit side entry for a person or account	Credit that person or account
Credit side entry for a person or account	Debit that person or account
Debit side discount column total	Debit Discount Allowed Account
Credit side discount column total	Credit Discount Received Account
Contra entry	No outside ledger posting for cash and bank transfer

For example, when cash is received from Anil Rs. 4,850 and discount allowed is Rs. 150, Anil’s account is credited with Rs. 5,000.

When Neha is paid by cheque Rs. 7,800 and discount received is Rs. 200, Neha’s account is debited with Rs. 8,000.

This is why the discount column matters. It helps close the personal account correctly.

Common Mistakes Students Make

The most common mistakes are not difficult concepts. They are careless placement errors.

Mistake 1: Putting Discount Allowed on the Credit Side

Discount allowed is connected with receiving money from a debtor.

So it appears on the debit side discount column.

Mistake 2: Putting Discount Received on the Debit Side

Discount received is connected with paying money to a creditor.

So it appears on the credit side discount column.

Mistake 3: Recording Trade Discount in the Discount Column

Trade discount is not recorded separately.

Only cash discount appears in the discount column.

Mistake 4: Posting Contra Entries Again in the Ledger

A contra entry is complete inside the cash book.

Do not post the same cash to bank transfer again as if it were an outside account.

Mistake 5: Balancing the Discount Columns

The discount columns are totalled, not balanced.

There is no “balance b/d” for discount allowed or discount received inside the cash book.

Mistake 6: Ignoring the Word “Bank”

If the question says “paid by cheque”, “bank charges”, “interest credited by bank”, or “deposited into bank”, the bank column is involved.

Do not use the cash column just because the chapter is called cash book.

Quick Decision Rules

Use these rules while solving questions:

Situation	What to do
Money received in cash	Debit side cash column
Money paid in cash	Credit side cash column
Money received through bank	Debit side bank column
Money paid through bank	Credit side bank column
Discount allowed to debtor	Debit side discount column
Discount received from creditor	Credit side discount column
Cash deposited into bank	Debit bank, credit cash
Cash withdrawn from bank for office use	Debit cash, credit bank
Trade discount	Do not record separately
Bank charges	Credit side bank column
Bank interest credited	Debit side bank column

How to Practise This Topic

Do not start by solving long cash book questions at full speed.

First practise column identification.

Take ten transactions and write only:

• debit side or credit side
• cash column or bank column
• discount allowed or discount received
• contra or not contra

After that, move to full cash book format.

Then practise balancing cash and bank columns separately.

Finally, practise ledger posting from the cash book.

This sequence is slower at the beginning, but it builds much stronger accuracy.

Frequently Asked Questions

What is a three-column cash book?

A three-column cash book is a cash book that has discount, cash, and bank columns on both the debit side and the credit side. It records cash transactions, bank transactions, and cash discounts in one place.

Which discount is written on the debit side?

Discount allowed is written on the debit side discount column. It is usually allowed to a debtor when money is received in full settlement.

Which discount is written on the credit side?

Discount received is written on the credit side discount column. It is usually received from a creditor when payment is made in full settlement.

Are the discount columns balanced?

No. The discount columns are totalled, not balanced. The debit side discount total is posted to Discount Allowed Account, and the credit side discount total is posted to Discount Received Account.

What is a contra entry in a three-column cash book?

A contra entry is an entry that affects both cash and bank columns of the same cash book. Cash deposited into bank and cash withdrawn from bank for office use are the most common contra entries.

How do I record cash deposited into bank?

Cash deposited into bank is recorded as a contra entry. Debit the bank column and credit the cash column with the same amount.

How do I record cash withdrawn from bank for office use?

Cash withdrawn from bank for office use is also a contra entry. Debit the cash column and credit the bank column with the same amount.

Should trade discount be recorded in the discount column?

No. Trade discount is deducted from the list price and is not recorded separately in the cash book. Only cash discount is recorded in the discount column.

Can the bank column show a credit balance?

Yes. If bank payments are more than bank receipts, the bank column can show a credit balance. This usually represents a bank overdraft.

Can the cash column show a credit balance?

Normally, no. The cash column should not show a credit balance because a business cannot pay more physical cash than it has.