Purchase & Purchase Return: Meaning, Accounting Treatment, Example

The compilation of these Recording Transactions Notes makes students exam preparation simpler and organised.

Purchases (Journal) and Purchase Return Book

When a business makes a purchase of goods that it trades in, the entry for the same is passed through a purchases book. The corresponding entries for the same are passed in the purchase return book, in case such goods are later returned. Let us study in detail these two books of accounts.

Purchase Journal

Also known as the Purchase journal, Invoice book, or Purchase daybook, a purchase book is a special purpose subsidiary book. It is prepared by a business to record all the credit purchases made by the firm. Purchases are recorded only for goods or items that are related to the core business operations of a company, that is, goods which are procured for resale.

So it can be summarized as cash purchases are recorded in the cash book and credit purchases are recorded in the purchase book. Let us take, for example, the following purchases in the books of Unreal Pvt Ltd.:

Jan 7 – Purchased 10 Keyboards from M/s A & Co. for 300 each
Jan 24 – Purchased 5 headphones from M/s X & Co. for 200 each

These entries will be posted in the purchases account. on the Dr. side, as follows:
Purchases and Purchase Return Book

The journal entry that will be passed for the same is as follows:
Purchases and Purchase Return Book 1

Purchase Return

Purchases and Purchase Return Book 2

At times it might be necessary to return a few goods back to a supplier when an order is received. This situation may arise due to the poor quality of products, inaccurate quantity, untimely delivery, or other such reasons.

Purchase returns are also called returns outward and an appropriate purchase returns or returns outward book is maintained for recording entries related to such books. All returns are primarily recorded in the purchase returns book unless the returns are not that frequent, in which case they are recorded in the journal. The journal entry to be passed in the case of purchase returns is

Creditor A/c – Dr. XX
To Purchase return A/c XX

There are a number of reasons for purchase returns, such as:

  • The buyer initially acquired an excessive quantity and wants to return the remainder
  • The buyer acquired the wrong goods
  • The seller sent the wrong goods
  • The goods have proven to be inadequate in some way


Show how the following events will appear in the ledger accounts.

Total purchase returns made at the end of a month are for 50,000, including returns made to A for 30,000 and returns made to B for 20,000.

Purchase Returns A/c
Purchases and Purchase Return Book 3

Sundry Creditors A/c
Purchases and Purchase Return Book 4

A’s Account
Purchases and Purchase Return Book 5

B’s Account
Purchases and Purchase Return Book 6