Purchases Returns or Returns
Outwards Journal:
Definition and Explanation:
Purchases returns journal is a book in which
goods returned to the supplier are recorded. This
book is also known as returns outwards and purchases
returns day book.
Goods
once purchased on credit may subsequently be
returned to the seller for certain reasons. For the
buyer such return of goods to the supplier (seller)
is know as purchases returns. The usual reasons for
returning goods are:
-
Purchaser finds that the goods are
unsatisfactory for some reasons, e.g. wrong
color, wrong size, not according to the sample,
not up to specification, not properly finished;
damaged in transit, etc.
-
The
purchaser is entitled by contract to return goods.
While
returning goods buyer sends a "debit note" to the
seller. The debit note contains the quantity of goods
returned and reasons for return of goods. The buyer
makes out two copies of debit note. One copy is retained
and the other copy is sent to the seller along with
goods. On the basis of the copy retained, the buyer
records this transaction in his "purchases returns
journal"
Suppose on
12.1.2005 S purchased 50 radio sets @ $1000 from I
electronics on credit. On receiving the goods, S finds
that 10 radio sets are of inferior quality. S returns,
these sets to the seller and sends him a debit note. The
debit not is given below:
|
Debit Note
Telephone.............
From S |
No.........
Date......... |
|
To I
Electronics, Washington |
|
We are debiting
your account with the value of under mentioned
sets returned to you for the reason stated
below. We are waiting for a credit note. |
|
Date |
Particulars |
Details |
Amount $ |
|
14.1.05 |
10 radio sets @
$1000 as per invoice
No.... dated
12.1.05
Less trade
discount
Returned goods
being of inferior quality |
10,000
Nil |
10,000 |
|
E. & O.E
Signature |
This debit
note is entered in the purchases returns journal in the
following way:
Purchases Returns Journal
|
Date |
Description |
Invoice |
L/F |
Details |
Amount |
|
14.1.2005 |
I Electronics
10 radio sets @ $1,000
Less trade discount
Goods returned being inferior quality |
-- |
CL.12 |
10,000
Nil
---------- |
10,000 |
Example:
Enter the
following transactions in the purchases returns journal
and post them to the ledger accounts:
Jan.5,
2005, Returned to Sunshine Biscuit Co.,
10 cases of biscuits @ $125 per case for damage in
transit.
Jan. 18,
2005, Returned to S Stores,
3 bags of sugar @ $500 per bag for not according to
order.
Jan. 26,
2005 Returned to P Flour Mills,
10 bags of flour @ $200 per bag for not according to
specification, less discount 5%
Solution:
Purchases Returns Journal (Book)
|
Date |
Description |
Debit Note No. |
L/F |
Details $ |
Amount $ |
|
5.1.2005 |
Sunshine Biscuit
Co.
10 cases of biscuits @ $125 per case
(Being damaged in transit) |
----- |
CL.8 |
1250 |
1250 |
|
18.1.2005 |
S Stores
3 bags of sugar @ $500 per bag
(Not according to order) |
----- |
CL. 12 |
1500 |
1500 |
|
26.1.2005 |
P Flour Mills
10 bags of flour @ $200 per bag
Less discount 5%
(Not according to specification) |
----- |
CL.16 |
2000
100
------- |
1900 |
|
31.1.2005 |
Purchases returns
A/C Cr. |
|
|
GL. 18 |
4650 |
Ledger
Sunshine Biscuit Co. A/C (Folio 8)
|
5.1.2005 |
Purchases return A/C |
$
1250 |
|
Balance b/d |
$
10,000 |
S
Stores. A/C (Folio 12)
|
18.1.2005 |
Purchases return A/C |
$
1500 |
|
Balance b/d |
$
8000 |
P
Flour Mills A/C (Folio 16)
|
26.1.2005 |
Purchases return A/C |
$
1900 |
|
Balance b/d |
$
15,000 |
Sunshine Biscuit Co. A/C (Folio 18)
|
|
|
$ |
31.1.2005 |
Sundry Creditors A/C
(Total returns for the month) |
$
4,650 |
It must be noted that,
the balances are respectively placed on the credit sides
of the accounts of the creditors to make the more
realistic. It shows that they i.e. Sunshine Biscuit Co.,
S Stores, P Flour Mills were creditors of the business
for $10,000, 8,000, 15,000 respectively. Now their
accounts have been debited with $1,250, 1,500 and 1,900
respectively and they are now creditors of the business
for $8,750, 6,500, and 13,100 respectively. On the other
hand the purchases returns account has not been credited
thrice on different dates. Instead it has been credited
with the total amount of three transactions aggregating
$4,650 (1250 + 1500 + 900), at a time at the end of the
month. Relevant Articles:
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