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Why must cash receipts be banked promptly? What is the imprest system for petty cash? How is the petty cash book reimbursed and posted? What is a contra entry in the cash book? What internal controls apply to cash and petty cash handling? What entries arise from bank charges, interest, and standing orders in the cash book? Why might the petty cash book not balance and how do you investigate? How is the receipt of capital or a loan recorded in the cash book? How are drawings recorded in the cash book? What is the treatment of cash discounts versus the cash received in the cash book?
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How do discounts allowed and received appear in the three-column cash book?

Intermediate

Answer

Discounts allowed (to customers for prompt payment) are recorded in the discount column on the debit (receipts) side; discounts received (from suppliers) in the discount column on the credit (payments) side. These columns are memoranda: their totals are posted to the debit of Discounts Allowed and credit of Discounts Received respectively.
Receipt side discount total -> Dr Discounts Allowed
Payment side discount total -> Cr Discounts Received
Real-world example When a customer pays early and takes a discount, the amount goes in the receipts-side discount column.

Common follow-ups: Which side records discount received? | How are the discount totals posted?

Books of Prime Entry Sales & Purchase Ledgers Cash Book & Petty Cash
All 26 Cash Book & Petty Cash questions