Special Purpose Subsidiary Books
Purchases and Purchases Return Book- Purpose, Format and Examples
After going through this lesson, you shall be able to understand the following concepts.• Introduction to Purchases Book • Format of a Purchases Book • Posting of Transactions in Purchases Book • Important Notes Relating to Purchases Book • Difference between Purchases Book and Purchases Account • Introduction to Purchases Return Book • Format of Purchases Return Book • Posting of Transactions in a Purchases Return Book
Introduction to Purchases Book
This is one of the most important book which records credit purchases of goods. As we have already understood all transactions related to cash are recorded in the cash book, thus, all the cash purchases are also recorded in the cash book but in case of goods purchased on credit basis we have to record the purchases in the Purchases Book. The goods mentioned above would mean the goods in which the firm is dealing in. The purchase of any asset (For Example land , building, machinery, etc) is never recorded in the Purchases Book. The entries in the Purchases Book are made on the basis of purchase invoice received from the suppliers with an amount net of trade discount/quantity discount.Types of Purchases To be recorded in 1) Cash Purchases : (a) Of Merchandise (i.e. Goods) (b) Of any other asset (Like Furniture etc) Cash Book Cash Book 2) Credit Purchases : (a) Of Merchandise (i.e. Goods) (b) Of any other asset (Like Furniture etc.) Purchase Book Journal Proper
Format of a Purchases BookPURCHASES BOOK Date Purchase Invoice No. Name of the Supplier L.F. Details (Rs) Total Amount (Rs) Purchases A/c Dr.
(a) Date: The date of transaction on which goods were purchased for credit shall be recorded in this column.
(b) Purchase Invoice Number: This shows the invoice number (i.e. source document) showing the purchase of goods.
(c) Name of the Supplier: As the name suggests in the given column we write the name of the supplier from whom the goods are purchased on credit. This also contains a detailed description of goods purchased.
(d) Ledger Folio (L.F.): This suggests the page number of the ledger on which the transaction is recorded.
(e) Details: This column contains the individual total amounts of various items. In case of a trade discount being received from a supplier it should be adjusted in this column only.
(f) Total Amount (Rs): In this column the net amount that is payable to a supplier shall be recorded.
Posting of Transactions from Purchases BookPosting of Individual Amount to the Suppliers A/c Posting of Amount to the Purchases A/c Individual amounts are daily posted to the credit of Suppliers Account by writing “By Purchases A/c” in the particulars column. Periodically, the total is posted to the debit of Purchases Account by writing “To sundries as per Purchases Book” in the particulars column.
Important Notes Related to Purchases Book
1) Only credit purchases of goods are to be recorded in the Purchases Book.
2) Goods would mean items or articles in which the business is dealing.
3) Trade discount must be shown as a separate deduction in the details column and only net amount is to be shown in the Total Amount Column.
4) Sales tax in case payable should be paid only on the amount payable after deduction of trade discount.
5) The amount that is arrived at after deducting trade discount and adding sales tax shall be the total credit purchases.
Difference between Purchases Book and Purchases AccountDifference between Purchases Book and Purchases Account BASIS OF DIFFERENCE PURCHASES BOOK PURCHASES ACCOUNT 1) Type of Book Purchase Book is a sub division of journal. It is a part of Ledger. 2) Set Format A Purchases Book is not divided into debit and credit side. A Purchases Account is sub divided into two sides- debit and credit. 3) Contents We only record information relating to credit purchases in Purchases Book. A Purchases Account contains information about the total purchases i.e. both cash and credit purchases. 4) Posting The total balance of a Purchases Book is transferred to the debit side of the Purchases Account. Balance of a purchase account is to be transferred to the debit side of the Trial Balance and after that to the Trading Account.
Example-1: Prepare Purchase Book of Baymonds (Deals in Gents Garments only) from the following transactions.2013 Particulars Oct 01 Purchased from M/s Anil & Sons , Mumbai , Invoice No. 501 500 Shirts @ Rs 1000 per Shirt 200 T-Shirts @ Rs 750 per T-Shirt Less : Trade Discount @ 20% Oct 12 Purchased on credit from M/s Gupta & Sons , Madhya Pradesh , Invoice No. 502 20 Tables @ Rs 10,000 per table Oct 15 Purchased from Monica Ltd , Ahmadabad , Invoice No. 509 75 Executive Shirts @ Rs 2000 per Shirt 25 Polo T-Shirts @ Rs 500 per T-Shirt Less : Trade Discount @ 10% Oct 25 Purchased for cash from M/s Shreya & Assoc ,Delhi , Invoice No. 902 400 Shirts @ Rs 900 per Shirt
Solution:PURCHASES BOOK Date Purchase Invoice No. Name of the Supplier L.F. Details (Rs) Total Amount (Rs) 2013 Oct 01 501 M/s Anil & Sons, Mumbai 500 Shirts @ Rs 1000 per Shirt 200 T-Shirts @ Rs 750 per T-Shirt Less : Trade Discount @ 20% 5,00,000 1,50,000 6,50,000 (1,30,000) 5,20,000 Oct 15 509 Monica Ltd, Ahmadabad 75 Executive Shirts @ Rs 2000 per Shirt 25 Polo T-Shirts @ Rs 500 per T-Shirt Less : Trade Discount @ 10% 1,50,000 12,500 1,62,500 (16,250) 1,46,250 Purchases A/c Dr. 6,66,250
Example-2: Record the following transactions in the Purchases Book of Rama Traders who deals in furniture:
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