Purchases Returns Book

Also known as Returns Outward Book or Purchases Returns Journal.

Purpose

To record the return of goods previously purchased on credit to the suppliers.

Reasons for Return:

• Defective quality
• Not as per sample
• Damaged in transit
• Excess quantity delivered
• Price charged is too high

Debit Note

When goods are returned, we send a document called Debit Note to the supplier.

• It informs the supplier that we have debited their account (reduced the amount we owe them).
• Contains details of goods, quantity, and reason for return.

Format of Purchases Returns Book

Solved Example

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

• Apr 04: Returned to LG Electronics, Mumbai:

  • 1 TV (defective) @ ₹15,000
  • Less: Trade Discount @ 10% (Same rate as purchase)

• Apr 08: Returned to Sony India, Delhi:

  • 1 Home Theater (wrong model) @ ₹10,000
  • Less: Trade Discount @ 5%

Solution: Purchases Returns Book

In the books of M/s Ram Electronics

Ledger Posting

1. Supplier Accounts (Creditors):

   • Debit each supplier's account.
   • Reason: Liability decreases.
   • Example: Debit LG Electronics with ₹13,500.

2. Purchases Returns Account:

   • Credit the Purchases Returns Account with the Total at month-end.
   • Entry: "By Sundries as per Purchases Returns Book ... ₹23,000".

Important Note on Trade Discount

If Trade Discount was deducted at the time of purchase, it MUST be deducted at the time of return also. We only reverse the actual cost recorded.

Quiz

💡 Final Wisdom: "Think of 'Debit Note' as 'Debt Reduced'. When you send a Debit Note, you are telling the supplier: 'I owe you less money now because I sent your stuff back!'"