Process cash book transactions and discounts
Use the cash book's dual role and record receipts, payments and settlement discounts consistently.
Cambridge IGCSE Accounting 0452 / (9–1) 0985, 2027–2029 Version 1. These lessons follow the 2027–2029 syllabus only; the separate 2026 syllabus update is not yet mapped. Written practice is self-checked, not an official Cambridge grade. Full timed-paper practice and human subject-teacher review remain pending.
Before you begin
- No previous accounting study is assumed. Keep the business, transaction and accounting period in view, and distinguish a resource, a claim and a performance result.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
Which statement describes the cash book?
What you will learn
- Explain why the cash book is both a prime-entry book and a bank or cash ledger
- Record receipts and payments through common methods
- Distinguish trade discount from cash discount
The cash book has two jobs
The cash book is a book of prime entry for cash and bank transactions and also acts as the ledger account for cash and bank. Enter receipts on the debit side and payments on the credit side, then post any related customer or supplier balance changes.
Record cash, cheques, debit-card and credit-card receipts, online payments and bank transfers in the appropriate cash or bank column using the evidence and the system's procedure. A bank transfer affects the bank account even when the counterparty account is a customer or supplier.
Discounts have different timing
A trade discount reduces the listed selling price before the transaction is recorded; record the net amount. A cash discount is allowed or received for prompt settlement and is recorded when the settlement terms are met.
Do not reduce an invoice by a possible cash discount before the customer qualifies for it. The discount allowed or received is separate from the original trade discount.
Pause and explain
A $800 list price receives 5% trade discount. What amount is recorded as the sale before any settlement discount?
Worked example
Goods list at $500 and receive a 10% trade discount. A customer later pays the $450 invoice and qualifies for a 2% cash discount. Find the cash receipt and discount allowed.
Show the worked solution
- Trade discount = 10% × 500 = $50; invoice = $450.
- Cash discount allowed = 2% × 450 = $9.
- Cash received = 450 − 9 = $441.
Answer Record the sale at $450 after trade discount. On settlement, the business receives $441 and records $9 cash discount allowed.
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Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A customer pays $270 by online bank transfer against an amount owed. State the cash-book and customer-account effects.
Give me a hint
The bank asset increases and the receivable decreases.
Compare my reasoning
- Debit Bank $270 in the cash book.
- Credit the customer's account $270 in the sales ledger.
- Use the bank confirmation to verify completed receipt.
Debit Bank $270; credit the customer's account $270.
Look for these in your work
- Receipt side correct
- Customer balance reduced
- Evidence checked
A $1,200 invoice is settled with a 3% cash discount allowed. Calculate the discount and bank receipt.
Give me a hint
Calculate the discount on the amount eligible for the settlement discount.
Compare my reasoning
- Discount = 0.03 × 1,200 = $36.
- Bank receipt = 1,200 − 36 = $1,164.
- Record the receipt and discount allowed separately in the appropriate cash-book columns and customer account.
Discount allowed $36; bank receives $1,164.
Look for these in your work
- Discount correct
- Receipt correct
- Separate records stated
An invoice lists goods at $900, less 10% trade discount, with 2% cash discount if paid promptly. The customer pays promptly. Calculate the invoice amount, cash discount and receipt.
Give me a hint
Apply trade discount first, then calculate cash discount on the net invoice.
Compare my reasoning
- Trade discount = $90; invoice = $810.
- Cash discount = 2% × 810 = $16.20.
- Receipt = 810 − 16.20 = $793.80.
Invoice $810; cash discount $16.20; bank receipt $793.80. The trade discount is reflected in the original net sale; the cash discount is recorded at settlement.
Look for these in your work
- Order of discounts correct
- Cash discount correct
- Receipt and distinction correct
Common mistakes
- Recording a trade discount as a separate expense
- Awarding a cash discount before the settlement condition is met
- Forgetting that the cash book also functions as the cash and bank ledger
What can you explain now?
When is a cash discount recorded?
Compare with the explanation
When the settlement qualifies for the discount
It depends on the actual settlement, not only the invoice date.
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Make it stick
At what stage does a trade discount reduce the recorded amount?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.