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Purchase Book and Purchase Account in Subsidiary Books

Arjun EP

Published on: October 11, 2020

What is purchase and purchase book?

Purchase is the goods (inventory, merchandise) purchases for resale.

Purchase may be in cash or credit.

Goods purchase in cash are recorded in cash book.

All the credit purchases of goods are recorded in purchase book.

This book does not record any purchase of fixed assets and goods purchase in cash.

This book considers only the credit purchases of goods dealt in.

This book must fulfill these conditions:

The transaction must be on credit purchase.

The purchase must be of goods-in-trade.

The primary document for a purchase book is a purchase invoice.

The sales invoice given by the seller.

In-fact, this sales invoice is purchase invoice for purchaser.

Other documents for the purchaser are advice note and delivery note.

Purchase Book

Date	Particulars (Name of creditors)	Invoice No.	LF	Amount	Amount




Total creditors					xxxx

Keep in Mind

Different organization has different needs.
Organizations prepare format according to their need.
Format used for subsidiary book are general format.

Some metrics units are used in subsidiary book:
1 ton = 1000 kg	1 dozen = 12 units	1 gallon (USA) = 3.78 liters
1 quintal = 100 kg	12 dozen = 1 gross	1 gallon (UK) = 4.55 liters
1 mann = 40 kg	1 gross = 144 units
1 dhadhi = 5 kg		1 barrel (USA) = 158.99 liters
1 dhaarni = 2.5 kg	1 ream = 500 sheet paper	1 barrel (UK) = 163.66 liters
1 Pound (lb) = 400 gram

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Click on link for YouTube videos topic wise :
Accounting Equation	http://tiny.cc/c89jkz
Basic Journal Entries in Nepali	http://tiny.cc/uaakkz
Basic Journal Entries	http://tiny.cc/8aakkz
Journal Entry and Ledger	http://tiny.cc/caakkz
Ledger Account	http://tiny.cc/haakkz
Subsidiary Book	http://tiny.cc/399jkz
Cash Book	http://tiny.cc/889jkz
Trial Balance and Adjusted Trial Balance	http://tiny.cc/c59jkz
Bank Reconciliation Statement (BRS)	http://tiny.cc/q59jkz
Depreciation	http://tiny.cc/ugakkz
Click on link for YouTube videos chapter wise:
Financial Accounting and Analysis (All videos)	http://tiny.cc/jlersz
Accounting Process	http://tiny.cc/mlersz
Accounting for Long Lived Assets	http://tiny.cc/plersz
Analysis of Financial Statement	http://tiny.cc/slersz

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Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country

PROBLEM: 1A

Following extracted data are given by YK Traders:

July 2:	Net purchased from TR Thapa Rs 7,000. (Invoice No. 25; LF PL 30)
July 5:	Net purchased from SK Sharma Rs 17,000. (Invoice No. 30; LF PL 25)
July 7:	Net purchased from BB Gurung Rs 27,000. (Invoice No. 35; LF PL 02)
July 9:	Net purchased from PP Aryal Rs 15,000. (Invoice No. 40; LF PL 09)

Required: (a) Purchase book; (b) Purchase account; (c) TR Thapa’s account

[Answer: Total creditors = Rs 66,000]

SOLUTION:

Purchase Book

Date	Particulars (Name of creditors)	Invoice No.	LF	Amount	Amount
July 2	Purchased from TR Thapa	25	PL 30		7,000
July 5	Purchased from SK Sharma	30	PL 25		17,000
July 7	Purchased from BB Gurung	35	PL 02		27,000
July 9	Purchased from PP Aryal	40	PL 09		15,000
Total creditors					66,000

POSTING PURCHASE BOOK INTO PURCHASE ACCOUNT

After preparing purchase book, creditors or suppliers are recorded in purchase account.

There is a separate purchase ledger to record the creditors or suppliers.

The credit purchases are posted, one-by-one to the debit side purchase account.

It is credited into creditors account.

Purchase Account

Dr							Cr
Date	Particulars	LF	Amount	Date	Particulars	LF	Amount
July 2	To TR Thapa	PL 30	7,000	July 9	By Balance c/d		66,000
July 5	To SK Sharma	PL 25	17,000
July 7	To BB Gurung	PL 02	27,000
July 9	To PP Aryal	PL 09	15,000
			66,000				66,000

Keep in Mind (KIM)

Purchase account Dr 7,000

To TR Thapa’s account 7,000

Here:

Purchase is in debit side, so all creditors are recorded in debit side.

But creditors are recorded in credit side when creditors account is prepared.

TR Thapa’s Account

Dr							Cr
Date	Particulars	LF	Amount	Date	Particulars	LF	Amount
July 2	To Balance b/d		7,000	July 2	By Purchase account		7,000

			7,000				7,000

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country

PROBLEM: 1B

Following transactions are given by PK Furniture House:

5 April:	Purchase from Bagmati Plastic Industries:
	25 chairs @ Rs 400 per unit
	20 stools @ Rs 200 per unit
	5 tables @ Rs 1,000 per unit
	Terms: 12% trade discount on orders over Rs 15,000; payment 2/15, n/30
10 April:	Purchased from MK Furniture for cash:
	3 sofas sets @ Rs 12,000 per set (10% cash discount)
15 April:	Purchased from Himal Traders:
	5 computer tables @ Rs 3,000 per unit
	4 reading tables @ 4,000 per set (less 10% trade discount)

Required: (a) Purchase Book; (b) Purchase Account; (c) Creditors account

[Answer: Purchase book = Rs 46,120; Purchase account = Rs 78,520]

SOLUTION:

Purchase Book

Date	Particulars	Invoice No.	LF	Amount	Amount
April 5	Purchased from Bagmati Plastic Industries:
	25 chairs @ Rs 400 per unit			10,000
	20 stools @ Rs 200 per unit			4,000
	5 tables @ Rs 1,000 per unit			5,000
	Total			19,000
	Less: Trade discount (19,000 @ 12%)			(2,280)	16,720

April 15	Purchased from Himal Traders:
	5 computer tables @ Rs 3,000 per unit			15,000
	4 reading tables @ Rs 4,000 per unit			16,000
	Less: Trade discount (16,000 @ 10%)			(1,600)	29,400
Total creditors					46,120

Keep in Mind (KIM)

When discount rate is given below the items, it is applied for all items (see April 5)

When discount rate is given in same line, it is applied only for bracket item (see April 15)

In subsidiary book, we do not record cash transaction. (see April 10)

Cash transaction is recorded in purchase account.

Purchase Account

Dr							Cr
Date	Particulars	LF	Amount	Date	Particulars	LF	Amount
April 5	To Bagmati Plastic Indus.		16,720	April 15	By Balance c/d		78,520
April 10	To Cash account		32,400
April 15	To Himal Traders		29,400
			78,520				78,520

Cash purchase (3 x Rs 12,000) = 36,000 – 36,000 @10% discount = 32,400

Bagmati Plastic Industries Account

Dr							Cr
Date	Particulars	LF	Amount	Date	Particulars	LF	Amount
April 5	To Balance c/d		16,720	April 5	By Purchase account		16,720

			16,720				16,720

Himal Traders Account

Dr							Cr
Date	Particulars	LF	Amount	Date	Particulars	LF	Amount
April 15	To Balance c/d		29,400	April 15	By Purchase account		29,400

			29,400				29,400

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PROBLEMS AND ANSWERS

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country

PROBLEM: 1A Purchase Books

Following extracted transactions are given by Kalika Furniture House:

5 April:	Purchase on credit from Bagmati Plastic Industries:
	25 chairs @ Rs 350 per unit
	20 stool @ Rs 200 per unit
11 April:	Purchased from MK Furniture for cash
	2 sofas sets @ Rs 12,000 per set (10% cash discount)
15 April:	Purchased on credit from Himal Furnishing House:
	10 computer tables @ Rs 4,000 per unit
	5 reading tables @ 5,000 per set
	(Less 15% trade discount)

Required: (a) Purchase book; (b) Purchase account

[Answer: (a) Total creditors = 68,000; (b) Purchase A/c = 89,600]

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country

PROBLEM: 1B Purchase Books

Arun Books Centre has following extracted data:

Mar 10:	Purchased books on credit from EP Publication:
	25 pieces of Accountancy Rs 550 each
	15 pieces of Business Studies Rs 300 each
	20 pieces of Economics Rs 250 each
	Terms: 20% trade discount on order over Rs 20,000; payment 5/10, n/60

Mar 15:	Purchased books on net cash from EP Publication:
	10 pieces Compulsory English Rs 250 each
	20 pieces Compulsory Nepali Rs 200 each

Mar 20:	Purchased book on credit from Binita Book House:
	15 pieces English Dictionary @ Rs 750 each (12% trade discount)
	10 pieces binding tape @ Rs 65 each