Purchases Book

Also known as Invoice Book or Purchases Day Book.

Purpose

To record all credit purchases of goods meant for resale or production.

⚠️ Important Exclusions:

1. Cash Purchases: Recorded in Cash Book.
2. Asset Purchases: Recorded in Journal Proper (e.g., buying furniture for office use on credit).

Format of Purchases Book

Columns Explained:

• Date: Date of transaction.
• Name of Supplier: From whom goods are bought. Details of items are written here.
• Inward Invoice No.: The bill number sent by supplier.
• L.F.: Page number of supplier's ledger account.
• Details: Calculation of gross amount less trade discount.
• Total Amount: Final net amount to be posted.

Solved Example

Record the following in Purchases Book of M/s Ram Electronics for April 2024:

• Apr 01: Purchased from LG Electronics, Mumbai:

  • 10 TVs @ ₹15,000 each
  • 5 Washing Machines @ ₹20,000 each
  • Trade Discount @ 10%

• Apr 05: Purchased from Sony India, Delhi:

  • 5 Home Theaters @ ₹10,000 each
  • Trade Discount @ 5%

• Apr 10: Purchased from Samsung World for Cash:

  • 2 Mobile Phones @ ₹15,000 each

• Apr 15: Purchased Furniture from Godrej Interio on credit for ₹50,000.

Solution: Purchases Book

In the books of M/s Ram Electronics

Notes:

1. Apr 10 (Samsung World): Ignored because it is a Cash Purchase.
2. Apr 15 (Godrej Interio): Ignored because it is an Asset Purchase (Furniture), not goods.

Ledger Posting from Purchases Book

1. Supplier Accounts (Creditors):

   • Credit each supplier's account with their respective net amount.
   • Example: Credit LG Electronics with ₹2,25,000.

2. Purchases Account:

   • Debit the Purchases Account with the Total of the Purchases Book at month-end.
   • Entry: "To Sundries as per Purchases Book ... ₹2,72,500".

Common Mistakes to Avoid

Quiz

💡 Final Wisdom: "Remember the golden rule of Purchases Book: Credit + Goods Only. If it's cash, kick it to Cash Book. If it's furniture, kick it to Journal Proper!"