Chapter 13 - Purchases & Purchases return journal and General Journal


Purchases Invoice

This is a document received from suppliers showing details of goods purchased from them. It is evidence that goods has been purchased on credit. A purchase invoice may be prepared using the following format.


National Textiles Co Ltd

Royal Road, Phoenix

Tel : 5999 8888

Name, Address and contact details of Supplier


Purchase Invoice No: 2020 101

Invoice Number



ABC Textiles Co Ltd

Royal Road , Camp de Masque

Tel : 5999 9999

Name, Address and contact details of trader (Buyer)

5th April 2020

Date of transaction



Qty

Description

Unit Price

Total


Details of goods purchased from supplier

40

T-Shirts

150

6 000


20

Jeans

250

5 000


15

Hoodies

300

4 500



15 500




Less 10% Trade Discount


1 550




Purchases Day Book


13 950


Amount transferred

Terms and conditions : 10% Cash Discount if payment made within 30 days



Purchases Day book

A purchases day book is used to record credit purchases only. It is prepared from purchase invoices received from suppliers. It is also known as Purchases Journal or Purchases Book. It may be prepared using the following format.

Purchases Day Book

Date

Details

Invoice No

Amount ($)

Apr  5

National Textiles Co Ltd

2020 101

13 950

9

XYZ Clothes Ltd

3455 203

5 500

14

Cool Textiles Ltd

1569 008

8 500


Transfer to Purchases Account


27 950


The total of the Purchases day book is posted to the debit side of the purchases account in the general ledger. Individual entries are then credited to suppliers account in the purchases ledger. (See Ledger entries below)

Credit Note received

If goods purchased are found to be damaged, they may be returned to suppliers. A credit note is received from suppliers showing full details of goods returned to them. It is evidence that goods has been returned to suppliers.

Purchases return day book

A purchase return day book is used to record goods returned to credit suppliers only. It is prepared from credit note received from suppliers. It is also known as Purchases return Journal /Return outwards day book and return outwards journal. It may be prepared using the following format.

Purchases Return Day Book

Date

Details

Credit Note No

Amount ($)

Apr  8

National Textiles Co Ltd

2020 991

900

13

XYZ Clothes Ltd

3455 883

500

20

Cool Textiles Ltd

1569 778

700


Transfer to Purchases Return Account


2 100


At the end of the month, the total of the Purchases return journal will be credited to the purchases return account in the general ledger. Individual entries will be debited to respective supplier’s account in the purchases ledger.

The double entries from the purchases journal and purchases return journal are as follows:


General Ledger

DR

Purchases Account

CR

Apr  30

Purchases Day Book

27 950











Purchases return Account





Apr  30

Purchases return journal

2 100







Purchases Ledger

DR

National Textiles Co Ltd Account

CR

Apr  8

Purchases return

900

Apr  5

Purchases

13 950








XYZ Clothes Ltd Account


Apr  13

Purchases return

500

Apr  9

Purchases

5 500








Cool Textiles Ltd Account


Apr 20

Purchases return

700

Apr  14

Purchases

8 500








General Journal

A general journal is used to record all transactions that cannot be recorded in other books of prime entry.  Each records made in the general journal is accompanied by a narration clearly explaining the reasons for doing the entries. A narration is used so as not rely on the memory of the accountant to explain the entries made. A general journal is mostly used to

1. record purchase of non current assets on credit

2. to write off bad debts

3. to record depreciation

4. to correct errors

5. to calculate capital