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Every business handles hundreds of paper cash exchanges and digital bank transfers every single week. If you wrote an individual journal entry and posted to separate ledger accounts for every tiny coffee or check, your general ledger would quickly become an unmanageable mess.
Enter the cash book, a special hybrid accounting tool that serves simultaneously as a book of prime entry and as the actual ledger accounts for cash and bank.
How can one record handle both physical dollar bills in the drawer and digital money sitting in the bank account?

The Two-Column Cash Book

A two-column cash book splits both sides of the account into two monetary columns: Cash for physical currency and Bank for check and electronic transactions.
The left (debit) side records all receipts coming in, while the right (credit) side records all payments going out.
When money simply moves between your register and your bank, you make a contra entry (marked with a 'C'), because both the debit and credit occur within this single book.
What happens when a customer pays early and you reward them with an agreed price reduction?

The Three-Column Cash Book

A three-column cash book adds a third monetary column on each side to record settlement discounts at the exact moment of payment.
Discounts allowed (an expense to us for early customer payment) appears on the debit side, while discounts received (income/reduction in cost when we pay suppliers early) appears on the credit side.