Final answer:
The discount columns in a three-column cash book are used to record discounts allowed to debtors and received from creditors during cash transactions, simplifying the tracking and accounting of these discounts for financial analysis and reporting.
Step-by-step explanation:
The purpose of the discount columns in a three-column cash book is to record discounts that are given to debtors when they settle their accounts early, or discounts received from creditors when the business settles its accounts early. The cash book with discount columns allows a business to keep an accurate record of cash transactions along with the discounts involved in a single entry bookkeeping system. When a debtor pays off their balance, the cash received is recorded in the cash column, while the discount allowed to the debtor is recorded in the discount column on the debit side. Similarly, when the business pays a creditor, it records the amount paid in cash in the cash column, and the discount received in the discount column on the credit side. The presence of these columns facilitates easy calculation of total discounts allowed to customers and received from suppliers within a certain period, which is useful for financial analysis and reporting.