Journal Entry for Credit Purchase Return

Journal Entry for Credit Purchase Return

In this article we would discuss the journal entry for credit purchase return. The credit purchase return is credited being decrease in expense and creditor’s individual account is debit. A sample journal entry for credit purchase return is shown below;

Date	Particular	Ledger Folio	Dr.	Cr.
01-01-2017	Creditor Individual a/c		xxx
01-01-2017	Purchase Return			xxx

The above transactions may also be recorded by crediting the purchase account and debiting the creditor individual account. However, this accounting treatment provides little information about purchase return as purchase account would show net purchases in the trial balance.

Date	Particular	Ledger Folio	Dr.	Cr.
01-01-2017	Creditor Individual a/c		xxx
01-01-2017	Purchase			xxx

 Example Journal Entry for Credit Purchase Return

Credit purchases amounting 135,000 were made from ABC, later on the purchased items were returned to ABC as goods were lacking quality. The following scheme of journal entry would be recorded in the books of accounts.

The following journal entry shall be recorded for credit purchase. Purchase account would be debited and ABC account would be credited.

Date	Particular	Ledger Folio	Dr.	Cr.
01-01-2017	Purchase		135,000
01-01-2017	ABC			135,000

The following journal entry shall be recorded for credit purchase return. The ABC account would be debited and purchase return account would be credited. Using a separate account for purchase return provides significant controlling information about purchases.

Date	Particular	Ledger Folio	Dr.	Cr.
01-01-2017	ABC		135,000
01-01-2017	Purchase Return			135,000

Journal Entry for Purchase Return

Journal Entry for Purchase Return

In this article we would discuss the journal entry for purchase return. There are two methods for recording the purchase return.In first method the purchase return is credited to purchase account by debiting the relevant account (who returned the purchases). It is a kind of reversal entry for purchase.

Date	Particular	Ledger Folio	Dr.	Cr.
01-01-2017	Cash/Bank		xxx
01-01-2017	Purchase			xxx

In second method the purchase return is charged to a separate account i.e. purchase return account. The purchase return account is credit and related account is debited. This method is more suitable for controlling the purchase return.

Date	Particular	Ledger Folio	Dr.	Cr.
01-01-2017	Cash/Bank		xxx
01-01-2017	Purchase Return			xxx

 

Journal Entry for Cash Purchase Return

Journal entry for cash purchase return may be recorded by debiting the cash and crediting the purchase return.

Date	Particular	Ledger Folio	Dr.	Cr.
01-01-2017	Cash		xxx
01-01-2017	Purchase Return			xxx

Journal Entry for Credit Purchase Return

Journal entry for credit purchase return may be recorded by crediting the purchase return account and debiting the creditor to whom goods are returned. A sample entry is shown

Date	Particular	Ledger Folio	Dr.	Cr.
01-03-2015	Creditor’ account		xxx
01-03-2015	Purchase Return			xxx

Journal Entry for Purchase on Cash

Journal Entry for Purchase on Cash

Journal entry for purchase in cash shall be recorded by debiting the purchase account and crediting the cash account. The purchase is debited being increase in expense and cash is credited being decrease in asset.

Date	Particular	Ledger Folio	Dr.	Cr.
	Purchase		xxx
	Cash.			xxx

Journal entry for Purchase on Cash in Periodic Inventory System

In periodic inventory system the purchases is immediately charged as expenses regardless of its sale and at the end of period (Financial year) the stock is counted and unsold items are accounted for as stock. Thus the following journal entries are recorded in book of accounts.

First Journal entry at the time of purchases made shall be recorded by debiting the purchase account being increase in expense and crediting the cash account being decrease in asset.

Date	Particular	Ledger Folio	Dr.	Cr.
	Purchase		xxx
	Cash.			xxx

Second entry at the year end; the stock is debited being increase in stock and income account is credited (because increase in stock will increase your profit, technically increase in stock is reduction of your already charged purchases expenses).

Date	Particular	Ledger Folio	Dr.	Cr.
	Stock		xxx
	P&L			xxx

 

Journal entry for Purchase on Cash in Perpetual Inventory System

In perpetual inventory system, the purchase is treated as stock at the time of purchase and once these items are sold, and then expense is recorded. Thus the following scheme of journal entries is recorded.

In first place the purchase are debited being increase in stock and cash is credit being decrease in asset. The term purchase inventory is being used to improve understanding , otherwise inventory account is a suitable heading.

Date	Particular	Ledger Folio	Dr.	Cr.
	Purchase Inventory		xxx
	Cash.			xxx

When inventory items are sold, then the following journal entry is recorded, the expense is charged to cost of goods account by debiting the Cost of Goods Sold account (CGS) account and stock is reduced by crediting the purchases inventory.

Date	Particular	Ledger Folio	Dr.	Cr.
01-01-2017	Cost of Sales		xxx
01-01-2017	Purchase inventory			xxx