Purchases Book

Quick Summary

• Records only credit purchases of goods for resale (not cash purchases)
• Also called Purchases Day Book or Purchases Journal
• Different from Purchases Account (which includes both cash and credit)
• Helps track amounts owed to suppliers
• Totals are posted to the ledger at month-end

What is a Purchases Book?

The Purchases Book is a special record book where businesses write down all goods they buy on credit. When you buy goods and promise to pay later, that transaction goes into this book.

For example, if Tunde’s Electronics Shop in Lagos buys 50 phones worth ₦2,500,000 from a supplier and agrees to pay after 30 days, this transaction is recorded in the Purchases Book. The shop did not pay cash immediately, so it’s a credit purchase.

Why Businesses Use a Purchases Book

Recording credit purchases separately helps business owners:

• Know exactly how much they owe different suppliers
• Track when payments are due
• Avoid mixing credit purchases with cash purchases
• Prepare accurate financial statements
• Verify supplier invoices match their records

Format of Purchases Book

A standard Purchases Book contains these columns:

How to Record Entries in Purchases Book

Follow these steps when recording credit purchases:

1. Check the invoice: Make sure it shows goods bought on credit
2. Record the date: Write when the purchase happened
3. Write supplier name: The person or company you bought from
4. Note invoice number: For easy reference later
5. Describe the goods: What you bought and quantity
6. Record the amount: Total value in Naira
7. Note folio number: Page number in the Purchases Ledger

Example Transaction

On March 10, 2025, Shade’s Supermarket in Ibadan bought goods worth ₦850,000 on credit from Nestle Nigeria. The invoice number is NST/2025/450. Here’s how it appears in the Purchases Book:

Purchases Book vs Purchases Account

Posting from Purchases Book to Ledger

At the end of each month, accountants transfer totals from the Purchases Book to the ledger. This process is called posting.

The Double Entry for Purchases Book

• Debit: Purchases Account (showing goods bought)
• Credit: Creditors Account or individual supplier accounts (showing debt owed)

Example: If total credit purchases for January were ₦2,730,000, the accountant posts:

• Debit Purchases Account with ₦2,730,000
• Credit Creditors Account with ₦2,730,000

What NOT to Record in Purchases Book

The Purchases Book is only for goods bought on credit for resale. Do NOT record:

• Cash purchases: These go in the Cash Book
• Assets bought on credit: Like machinery or vehicles (use Purchases Journal)
• Purchases returns: When you return goods (use Purchases Returns Book)
• Expenses: Like rent or salary (use separate expense journals)
• Personal purchases: Goods not for resale

Trade Discount in Purchases Book

Sometimes suppliers offer trade discounts. You record only the amount after discount in the Purchases Book.

Example: Emeka’s Store buys goods listed at ₦500,000. The supplier gives 10% trade discount.

• List price: ₦500,000
• Trade discount (10%): ₦50,000
• Amount recorded in Purchases Book: ₦450,000

Common Exam Mistakes Students Make

Practice Questions

Multiple Choice Questions

1. The Purchases Book records:
a) All purchases made by a business
b) Only cash purchases of goods
c) Credit purchases of goods for resale ✓
d) Purchases of fixed assets

2. Another name for Purchases Book is:
a) Purchases Account
b) Purchases Day Book ✓
c) Cash Book
d) Sales Journal

3. When posting from Purchases Book to the ledger, you:
a) Credit Purchases Account and debit Creditors Account
b) Debit Purchases Account and credit Creditors Account ✓
c) Debit both Purchases and Creditors Accounts
d) Credit both Purchases and Creditors Accounts

4. Which of these should NOT be recorded in Purchases Book?
a) Goods bought on credit for resale
b) Merchandise purchased on 30 days credit
c) Office furniture bought on credit ✓
d) Stock purchased from suppliers on credit terms

Essay Questions

1. State five differences between Purchases Book and Purchases Account. (10 marks)

Examiner’s tip: Use a table format. Clearly state one difference per row. Don’t just list features of one without comparing to the other.

2. Explain four items that should NOT be recorded in a Purchases Book and give reasons. (8 marks)

Examiner’s tip: Don’t just list items. Explain WHY each item should not be there. For example, “Cash purchases should not be in Purchases Book BECAUSE it only records credit purchases where payment is not immediate.”

3. The following credit purchases were made by Bello Stores in April 2025:

• April 2: Bought goods from Alhaji Stores, ₦450,000
• April 10: Purchased merchandise from Kano Traders, ₦780,000
• April 20: Bought stock from Musa Enterprises, ₦620,000

Required: (a) Prepare the Purchases Book for April 2025 (6 marks)
(b) Show the posting to the Purchases Account and Creditors Account (4 marks)

Examiner’s tip: In part (a), include all necessary columns with proper headings. In part (b), use T-account format clearly showing debit and credit sides.

Memory Aid

Remember CREDIT for Purchases Book:

• C – Credit purchases only (not cash)
• R – Resale goods (not assets)
• E – Entry book (subsidiary book)
• D – Debit Purchases when posting
• I – Invoice details recorded
• T – Total posted monthly

Related Topics

• Purchases Returns Book – Recording returned goods
• Sales Book – Recording credit sales
• Purchases Day Book – Alternative name explained
• Cash Book – Recording cash purchases
• Components of Subsidiary Books – Overview of all books of original entry