CHAPTER 15

Purchase and purchase returns day

books
Contents
 What is the purchase day book?
 What is the purchase returns day book?
 Entering purchase transactions in the
day books
 Coding data
 Posting the day book totals
What is the purchase day
book?
 Used to keep a list of all of the invoices received
from suppliers of goods and services to the
business.
 Like the sales day book, it is a 'book of prime
entry' or a 'primary record' and not a ledger
account.
What is the purchase returns
day book?
Lists credit notes received in respect of
purchase returns in chronological order.
Why returns? Supplier to accept?
Faulty or damaged goods
Goods purchased on a 'sale or return' basis
will be returned if they cannot be sold
If goods have been ordered by the
business and are in good condition but are
surplus to the requirements of the
purchasing business, it is up to the
supplier whether he accept them as
returns
Discussion
Which of the following cases would you classify as a purchase
return by your business
(a) Goods purchased from you by a customer and returned.
(b) You have been billed twice, by accident, for a single
amount of goods, and you return the superfluous purchase
invoice.
(c) You have been delivered some goods which are faulty and
you send them back. You have posted the invoice received
in respect of the goods.
(d) A customer sends back some sub-standard goods to you.
(e) A supplier sends back some goods to you which you have
delivered there by mistake, thinking the supplier was in
fact a customer.
(f) An item of inventory is damaged in a fire at your
warehouse and, because you cannot use it any more, you
have to go back to the original supplier and order a
replacement.
(g) You question an invoice because you have been billed for
items which you have not ordered, and which you have not
Analysis of purchases
Posting the day book totals

Narrative: Posting purchases

Narrative: Posting purchases returns

Question
You work for Bodgett DIY. You receive the
following invoices from suppliers on the
morning of 23 November 20X7. Each
invoice has already been given a
reference by one of your fellow workers
for Bodgett DIY's own accounting
system.
Tasks
(a) Post the invoices to the purchase day
book
(b) Set out the double entry for these
Quiz
1 What is the purchase day book used for?
2 What does the purchase returns day
book do?
3 What is the double entry for a credit
purchase?
4 What is the double entry where the
credit purchase includes sales tax?
5 What is the double entry for purchase
returns with sales tax?
Answer
1 To keep a list of all the invoices received from
suppliers of goods or services to the business.
2 It lists credit notes received in respect of purchase
returns in chronological order.
3 DEBIT Purchases
CREDIT Payables
4 DEBIT Purchases (sales tax exclusive amount)
DEBIT Sales tax
CREDIT Payables (sales tax inclusive amount)
5 DEBIT Payables (sales tax inclusive)
CREDIT Purchase returns/Purchases (sales tax
exclusive)
CREDIT Sales tax
QB 32
If a purchase return of $48 has been wrongly
posted to the debit of the sales returns
account, but has been correctly entered in
the supplier's account, the total of the trial
balance would show
A The credit side to be $48 more than the
debit side
B The debit side to be $48 more than the
credit side
C The credit side to be $96 more than the
debit side
D The debit side to be $96 more than the
QB 33
A company received an invoice from ACB Co,
for 40 units at $10 each, less 25% trade
discount, these being items purchased on
credit and for resale. It paid this invoice
minus a cash discount of 2%. Which journal
entries to record?

Purchases 300
ABC Co 300
ABC Co 300
Discount allowed 6
Cash 294