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.
Date |
Particulars (Name of creditors) |
Invoice No. |
LF |
Amount |
Amount |
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Total creditors |
xxxx |
Keep in Mind
Different organization has different needs. |
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Organizations prepare format according to their need. |
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Format used for subsidiary book are general format. |
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Some metrics units are used in subsidiary book: |
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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 |
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1 dhadhi = 5 kg |
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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 : |
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Accounting Equation |
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Basic Journal Entries in Nepali |
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Basic Journal Entries |
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Journal Entry and Ledger |
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Ledger Account |
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Subsidiary Book |
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Cash Book |
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Trial Balance and Adjusted Trial Balance |
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Bank Reconciliation Statement (BRS) |
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Depreciation |
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Click on link for YouTube videos chapter wise: |
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Financial Accounting and Analysis (All videos) |
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Accounting Process |
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Accounting for Long Lived Assets |
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Analysis of Financial Statement |
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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.
Dr |
|
Cr |
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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 |
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July 7 |
To BB Gurung |
PL 02 |
27,000 |
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July 9 |
To PP Aryal |
PL 09 |
15,000 |
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66,000 |
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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 |
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Date |
Particulars |
LF |
Amount |
Date |
Particulars |
LF |
Amount |
July 2 |
To Balance b/d |
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7,000 |
July 2 |
By Purchase account |
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7,000 |
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7,000 |
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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: |
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25 chairs @ Rs 400 per unit |
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20 stools @ Rs 200 per unit |
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5 tables @ Rs 1,000 per unit |
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Terms: 12% trade discount on orders over Rs 15,000; payment 2/15, n/30 |
10 April: |
Purchased from MK Furniture for cash: |
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3 sofas sets @ Rs 12,000 per set (10% cash discount) |
15 April: |
Purchased from Himal Traders: |
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5 computer tables @ Rs 3,000 per unit |
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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: |
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25 chairs @ Rs 400 per unit |
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10,000 |
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20 stools @ Rs 200 per unit |
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4,000 |
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5 tables @ Rs 1,000 per unit |
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5,000 |
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Total |
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19,000 |
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Less: Trade discount (19,000 @ 12%) |
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(2,280) |
16,720 |
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April 15 |
Purchased from Himal Traders: |
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5 computer tables @ Rs 3,000 per unit |
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15,000 |
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4 reading tables @ Rs 4,000 per unit |
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16,000 |
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Less: Trade discount (16,000 @ 10%) |
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(1,600) |
29,400 |
Total creditors |
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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 |
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Cr |
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Date |
Particulars |
LF |
Amount |
Date |
Particulars |
LF |
Amount |
April 5 |
To Bagmati Plastic Indus. |
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16,720 |
April 15 |
By Balance c/d |
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78,520 |
April 10 |
To Cash account |
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32,400 |
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April 15 |
To Himal Traders |
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29,400 |
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78,520 |
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78,520 |
Cash purchase (3 x Rs 12,000) = 36,000 – 36,000 @10% discount = 32,400
Bagmati Plastic Industries Account
Dr |
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Cr |
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Date |
Particulars |
LF |
Amount |
Date |
Particulars |
LF |
Amount |
April 5 |
To Balance c/d |
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16,720 |
April 5 |
By Purchase account |
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16,720 |
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16,720 |
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16,720 |
Himal Traders Account
Dr |
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Cr |
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Date |
Particulars |
LF |
Amount |
Date |
Particulars |
LF |
Amount |
April 15 |
To Balance c/d |
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29,400 |
April 15 |
By Purchase account |
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29,400 |
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29,400 |
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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: |
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25 chairs @ Rs 350 per unit |
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20 stool @ Rs 200 per unit |
11 April: |
Purchased from MK Furniture for cash |
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2 sofas sets @ Rs 12,000 per set (10% cash discount) |
15 April: |
Purchased on credit from Himal Furnishing House: |
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10 computer tables @ Rs 4,000 per unit |
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5 reading tables @ 5,000 per set |
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(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: |
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25 pieces of Accountancy Rs 550 each |
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15 pieces of Business Studies Rs 300 each |
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20 pieces of Economics Rs 250 each |
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Terms: 20% trade discount on order over Rs 20,000; payment 5/10, n/60 |
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Mar 15: |
Purchased books on net cash from EP Publication: |
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10 pieces Compulsory English Rs 250 each |
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20 pieces Compulsory Nepali Rs 200 each |
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Mar 20: |
Purchased book on credit from Binita Book House: |
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15 pieces English Dictionary @ Rs 750 each (12% trade discount) |
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10 pieces binding tape @ Rs 65 each |
[Answer: (a) Total creditors = 29,150; (b) Purchase A/c = 35,650]
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