Recording Transactions

Purchases (Journal) and Purchase Return Book

When a business makes a purchase of goods that it trades in, the entry for the same is passed through a purchases book. The corresponding entries for the same are passed in the purchase return book, in case such goods are later returned. Let us study in detail about these two books of accounts.

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Purchase Journal

Also known as the Purchase journal, Invoice book or Purchase day book, a purchase book is a special purpose subsidiary book.  It is prepared by a business to record all the credit purchases made by the firm. Purchases are recorded only for goods or items that are related to the core business operations of a company, that is, goods which are procured for resale.

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So it can be summarized as cash purchases are recorded in the cash book and credit purchases are recorded in the purchase book. Let us take, for example, the following purchases in the books of Unreal Pvt Ltd.:

Jan 7 – Purchased 10 Keyboards from M/s A & Co. for 300 each

Jan 24 – Purchased 5 headphones from M/s X & Co. for 200 each

These entries will be posted in the purchases account. on the Dr side, as follows:

Date Particulars L.F. Total amount
7 Jan M/s A & co. 3000
24 Jan M/s X & co. 1000

The journal entry that will be passed for the same is as follows:

 Date Particulars Debit Credit
 31st March Purchas A/c Dr  4000
To M/s A & Co. 3000
To M/s A & Co. 1000

Purchase Return

Purchase Return Format

At times it might be necessary to return a few goods back to a supplier when an order is received. This situation may arise due to the poor quality of products, inaccurate quantity, untimely delivery or other such reasons.

Purchase returns are also called returns outward and an appropriate purchase returns or returns outward book is maintained for recording entries related to such books. All returns are primarily recorded in the purchase returns book unless the returns are not that frequent, in which case they are recorded in the journal. The journal entry to be passed in the case of purchase returns is

Creditor A/c – Dr.                    XX

To Purchase return A/c                       XX

There are a number of reasons for purchase returns, such as:

  • The buyer initially acquired an excessive quantity and wants to return the remainder
  • The buyer acquired the wrong goods
  • The seller sent the wrong goods
  • The goods have proven to be inadequate in some way

Solved Question for You

Question: Show how the following events will appear in the ledger accounts.

Total purchase returns made at the end of a month are for 50,000, including returns made to A for 30,000 and returns made to B for 20,000.

Answer –

Purchase Returns A/c

Date Particulars Amount Date Particulars Amount
By Sundry Creditors 50000


Sundry Creditors A/c

Date Particulars Amount Date Particulars Amount
To Purchase returns 50000


A’s Account

Date particulars Amount                    Date Particulars amount
To purchase returns 30000


B’s Account

Date                     Particulars Amount Date Particulars Amount
To purchase returns 20000


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