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Purchase Return Book : Meaning, Format, and Example

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What is a Purchase Return Book?

The Purchase Return Book refers to the subsidiary book where the record of the ‘return of goods purchased on credit’ is maintained. It is also called as ‘Return Outward Book’. There could be a number of factors for which the suppliers might return the goods that they purchased earlier on credit. Some of the reasons are as follows:

1. It is maybe because the goods delivered by the supplier do not match the sample.

2. Sometimes, the goods bought do not deliver at the scheduled time.

3. When the good has any fault, or goods might be broken or damaged while being out for delivery.

4. Goods can be returned if the goods don’t match the order being placed.

5. Goods are of poorer quality than what was promised.

6. Also, the return might take place if the price of the invoice exceeds the amount which was negotiated at the time when the order was placed.

What are Subsidiary Books?

When the business is small, it is easy to record every transaction in a single book called ‘Journal’. Journal is also known as the book of original entry. But gradually when the business expands, it becomes inconvenient to record such a large number of transactions in a single book. So, the book of original entry or Journal is further divided into different special journals called ‘Subsidiary Books’. Firstly, all the transactions are recorded in the relevant subsidiary books and afterwards posted to the ledger accounts. For example; Cash book is prepared to record all the cash transactions, Sales book is prepared to record all the credit sales, and so on. Purchase return book is also an important subsidiary book to look upon.

What is a Debit Note?

At the time when goods are delivered back to the supplier, in addition to the returned products, a debit note is also generated. A ‘debit note’ incorporates the party’s name from which the credit purchase was made, the particulars of the returned products, and also the reasons for which the goods have been returned.

Some of the important features of a Debit Note are:

  • Each debit note has a unique serial number.
  • It also clearly has the correct date. 
  • Also, for every debit note, a replica is created in case it might be useful in the future. 
  • When the goods are returned back to the supplier, he is provided with the original copy of the debit note. He is also notified regarding the amount debited from his account on account of returned products. 
  • It is due to the fact that the sum stated on this note is debited from the party’s account, it is also known as a debit note. 
  • In exchange for the debit note, the party to whom the items were returned generates a credit note and sends it back to the party who initiated the process of return.

The duplicate copy of the debit note serves as the source document using which the purchase return journal is prepared and entries are recorded. A debit note can be sent when the sales invoice seems to be mistakenly undercharged, undercast, or when specific products are not documented in the sales invoice. 

Format of Purchase Return Book:

The basic structure or the format of the purchase return book is identical to that of the formats of the purchase book and sales book. Also, the entries in the purchase return book are recorded in the same way as those recorded in the purchase book and sales book. There is a separate field in the purchase return book where the debit note number is written. Debit note no. actually replaces the invoice number written in the Purchase book. The format of the purchase return book is presented below:

Purchase Return Book

Date 

Particulars

Debit Note No. L.F.

Details
(₹)

Purchase Return
(₹)

Input CGST
(₹)

Input SGST
(₹)

Input IGST
(₹)

Total Amount
(₹)

                   

Following is the explanation of the columns of the purchase return book:

1. Date: The date on which the return of goods on credit purchases has been placed is mentioned in this column.

2. Particulars: This column consist the details like the name of the party to which the return has been placed, a complete description of the goods returned, the exact quantity being returned, the unit price of the good, and the percentage of trade discount.

3. Debit Note No.: It records the number of the debit note using which the transaction in the purchase return book has been recorded.

4. L.F.: L.F. stands for Ledger Folio. It records the page number of the ledger where the transaction has been posted.

5. Details: This column represents the gross amount of the goods returned. If there is any kind of trade discount, it is deducted from the gross amount.

6. Purchase Return: This column represents the net amount of the goods return adjusted with the amount of trade discount.

7. Input CGST: CGST is chargeable on the goods which are exchanged within the state meaning thereby the seller and the buyer belong to the same state. CGST is calculated on the net purchase return value already adjusted with the trade discount. This amount is shown in this column.

8. Input SGST: SGST is again chargeable on the goods which are exchanged within the state meaning thereby the seller and the buyer belong to the same state. Like CGST, SGST is also calculated on the net purchase return value already adjusted with the trade discount and this amount is shown in this column.

9. Input IGST: IGST is chargeable on the goods which are bought from outside the state meaning thereby the seller and the buyer does not belong to the same state. IGST is calculated on the net purchase return value already adjusted with the trade discount. The amount for IGST is mentioned in this column.

10. Total Amount: It consists of the total amount which finally arrives after including the balances of every column. 

Illustration:

In Model Town, Punjab, Mr. Shyam owns an enterprise dealing with spare parts. Following are the transactions that happened in the month of October 2022. Assume CGST @6%, SGST @6%, and IGST @12%. Prepare a Purchase Return Book for Mr. Shyam.

Year 2022

Particulars

October 14 

(Debit note no. 131) Goods were returned to Ghanshyam & Co, Amritsar (Punjab) worth ₹6000 for the reason that goods were not similar to the sample

October 17

(Debit Note no. 135) Allowance was claimed from Rama Prasad & Sons, Ludhiana (Punjab) for the mistake in the sale invoice for ₹1500

October 26

(Debit Note no. 138) Goods were returned to Kasturi enterprise, Panipat (Haryana) worth ₹3000 and 10% trade discount was applicable

Solution:


Last Updated : 28 Jul, 2023
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