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CMA Foundation · Fundamentals of Financial and Cost Accounting · Cash Book, Bank Book, Petty Cash Book, Bank Reconciliation Statement

In a triple column cash book, Ramesh Traders received Rs 9,700 by cheque from a customer, Mohan, in full settlement of Rs 10,000 and deposited it in the bank the same day. Which entry is correct?

The bank column is debited Rs 9,700 and the discount allowed column Rs 300, with Mohan credited Rs 10,000. The Rs 300 is a concession given to a customer, so it is discount allowed. The cheque was deposited, so the bank column is used rather than cash.

  1. ADebit bank Rs 9,700 and discount allowed Rs 300; credit Mohan Rs 10,000Correct
  2. BDebit bank Rs 10,000; credit Mohan Rs 9,700 and discount received Rs 300
  3. CDebit bank Rs 9,700 and discount received Rs 300; credit Mohan Rs 10,000
  4. DDebit cash Rs 9,700 and discount allowed Rs 300; credit Mohan Rs 10,000

Explanation

Cheque deposited increases the bank balance by Rs 9,700. The Rs 300 concession given to the customer is discount allowed, a debit-side expense in the discount column. Mohan's account is credited with the full Rs 10,000 settled. Discount received is wrong as it applies to suppliers.

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