Purchases returns book

Purchases returns book

After purchases of goods, the business unit may find that some of the goods are not upto the satisfactory level because of the following reasons:

·        Goods may be defective.

·        They might have been damaged in transit.

·        Quantities delivered may not agree with the invoice.

·        They might have been received quite late (off-season).

·        They might not be as per the samples or specifications.

·        There may be a breach of agreement.

Therefore, the buyer may return them to the suppliers.

Purchases returns book is a subsidiary book in which transactions relating to return of previously purchased goods to the suppliers, for which cash is not immediately received are recorded. Since goods are going out to the suppliers, they are also known as returns outward and the book is called as ‘returns outward book or returns outward journal’. This book is prepared like purchases book and details are entered as mentioned in the format given below:

Format

1. Posting from the purchases returns book

After the transactions are recorded in the purchases returns book, posting them to ledger involves two steps:

Step 1: Posting to personal accounts of creditors: Every day, each entry in purchases returns book is posted to the debit side of the respective personal account of the creditor by writing the words ‘To Purchases Returns account’.

Step 2: Posting to Purchases returns account: At the end of the month, the aggregate of the purchases returns is ascertained. It is the total purchases returns for the month and is posted to the credit side of purchases returns account by debiting ‘Sundry creditors account’.

2. Debit note – the source document for returns outward

A ‘debit note’ is a document, bill or statement sent to the person to whom goods are returned. This statement informs that the supplier’s account is debited to the extent of the value of goods returned. It contains the description and details of goods returned, name of the party to whom goods are returned and net value of the goods so returned with reason for return.

Illustration 4

Enter the following transactions in the purchases returns book of Hari who is dealing in automobiles and post them into the ledger.

2017

Jan. 5          Returned to Anand 5 clutch plates @ Rs. 200 each, not in accordance with order.

Jan. 14 Returned to Chandran 4 brake shoes @ Rs. 200 each and 10 rear view mirrors @350 each, due to inferior quality.

Solution