Introduction to Purchase Book and Purchase Return Book
The book of original entry is called a subsidiary book or a daybook. A subsidiary book is used to record transactions of a similar nature. There are six kinds of subsidiary books maintained by most organizations; Cashbook, Purchase book, Purchase Returns book, Sales book, Sales return book, and Journal proper. In case an organization does not maintain subsidiary books, it maintains Journal for all the transactions. A Journal is a record of all entries irrespective of their nature and does not bifurcate the entries according to their nature.
Let’s understand the Purchase book and Purchase Return Book in detail.
Purchase Book
A purchase book or a purchase day book is a subsidiary book. It contains the record of all credit purchases made. The cash goods purchases are recorded in the cash book. A Purchase book holds the record for the purchase of goods only and not purchases of assets. Asset purchase entries are recorded in the Journal proper.
The entries recorded in the Purchase book are done based on source documents like invoices or bills received from the suppliers of goods. The entries in the purchase book are done for the net amount of the invoice and do not include trade discounts and other details on the invoice.
The total of the Purchase book is entered monthly on the Debit side of the Purchases A/c but the individual accounts of the suppliers may be entered daily. When the volume of transactions in an organization is large, the entries for the purchase a/c in the ledger may be posted weekly or fortnightly.
Performa of the Purchase Book
Purchase Return Book
When the goods purchased on credit are returned to the supplier, the entries for such transactions are recorded in the Purchase return book or the purchase returns day book. Goods purchased are sometimes returned by the buyer on account of a defect or low quality. A separate subsidiary book is maintained for these purchase returns since these returns are not deducted from the purchases in the Purchase book. The entry for a purchase return transaction is done for the net amount on the invoice.
A debit note in duplicate is prepared for every return of goods. The original one is sent to the supplier while the duplicate copy is kept by the organization for its records. The Debit note includes the date, serial number, name of the supplier, details of goods returned, and the reason for the return of the goods.
The supplier can also prepare a Credit note and send it to the customer when the goods are received from the customer.
Performa of the Purchase Return Book
Solved Example
Q. Record the following transactions in the books of M/s. X and Co. and in the Purchase Account
Solution:
In the books of M/s. X and Co.
Purchase Book
FAQs on Purchase Book vs. Purchase Return Book
1. What is the difference between a purchase book and a purchase return book?
A purchase book and a purchase return book serve different roles in accounting. The purchase book records all credit purchases of goods meant for resale, whereas the purchase return book is used to log goods that are returned to suppliers after purchase. These specialized books help ensure accurate records and support inventory tracking. The purchase book deals only with incoming inventory, while the purchase return book tracks outgoing returns. Clearly separating these transactions helps businesses confirm both genuine purchases and any reductions due to returns, supporting accurate financial statements and inventory management.
2. What is purchase and purchase return?
A purchase refers to the acquisition of goods or services by a business, typically for resale or production. It is a fundamental transaction recorded in the purchase book. On the other hand, a purchase return occurs when a business sends back goods to the supplier, usually because the items are defective, excess, or not as ordered. This is recorded in the purchase return book. Both transactions affect inventory levels and account balances. Accurate tracking of purchases and purchase returns helps ensure proper cost calculation and inventory control.
3. What is a purchase return book with an example?
The purchase return book is an accounting record used to document goods returned to suppliers. For example, if a company buys 50 shirts from a supplier and later finds 10 are defective, they return these 10 shirts. This transaction is recorded in the purchase return book, specifying details like date, supplier, quantity, and reason for return. By maintaining a separate purchase return book, businesses ensure clarity on returned goods, which helps reconcile accounts with suppliers and maintain accurate inventory records.
4. What is another name for a purchase return book?
The purchase return book is also commonly referred to as the Returns Outward Book. This alternative name highlights that goods are moving out of the business and back to the supplier. The term is used interchangeably in accounting, especially in manual bookkeeping systems. Both names serve the same purpose—tracking goods returned—helping businesses accurately record and manage purchase returns.
5. What types of transactions are recorded in a purchase book?
A purchase book is used exclusively for recording credit purchases of stock intended for resale. It does not include cash purchases, purchase of assets, or any purchase returns. The following types of transactions are captured in a purchase book:
- Credit purchases of merchandise or trading goods
- Bulk inventory orders for resale
6. Why is it important to maintain a purchase return book?
Maintaining a purchase return book is essential for businesses to track goods sent back to suppliers. This record enables accurate reconciliation of supplier accounts and ensures that inventory and cost calculations reflect only usable goods. Some key reasons to keep a purchase return book include:
- Tracking returned goods and their values
- Adjusting supplier balances promptly
- Preventing overstatement of inventory
7. How are entries posted from the purchase return book?
Entries from the purchase return book are regularly transferred to relevant accounts in the ledger. When goods are returned, each entry is first recorded in the purchase return or returns outward book, then summarized at the end of a period. The total is posted to the ledger as follows:
- The supplier’s account is credited to reduce the amount owed
- The purchase return account is debited with the total returns
8. Who prepares the purchase book and purchase return book?
In most organizations, the purchase book and purchase return book are prepared by accounting staff or bookkeepers within the accounts department. These roles are responsible for recording each relevant transaction as soon as supporting documents, such as invoices (for purchases) or debit notes (for returns), are received. Proper preparation and maintenance by skilled personnel help ensure that all purchase and return records are up to date, accurate, and compliant with basic accounting principles.
9. What documents are needed to record entries in the purchase return book?
To record an entry in the purchase return book, businesses rely on specific documentation to validate the return. The most important documents include:
- Debit note issued to the supplier, stating the reason and value of returns
- Original purchase invoice for reference
- Goods received note, if applicable
10. How do purchase return books affect financial statements?
Purchase return books have a direct impact on a business’s financial statements. By tracking goods sent back to suppliers, these returns reduce the total purchases recorded for the period. This, in turn, lowers the cost of goods sold and adjusts inventory values. The net effect is a more accurate representation of expenses and inventory on the balance sheet and income statement. Properly managed purchase return books ensure that financial statements reflect the actual movement of stock and avoid overstating costs.
11. What information is recorded in a purchase book?
A purchase book captures detailed information for every credit purchase made by a business. The recorded data typically includes:
- Date of purchase
- Name of the supplier
- Description and quantity of goods purchased
- Invoice number
- Total value of the purchase
12. How does a business distinguish between purchase return and sales return books?
Purchase return and sales return books are separate accounting records used to track different types of returns. Purchase return books document goods a business sends back to suppliers, while sales return books record items customers return to the business. Keeping these books separate allows clear distinction between incoming and outgoing return transactions. This separation helps businesses accurately manage supplier relationships, customer service, and overall inventory levels, supporting better financial analysis and reporting.
