In any organisation where company buys and sells the goods on credit, at that organisation, we need to divide journal into subsidiary books. One of these subsidiary books is purchase book. In purchase book, we record all transactions relating to credit purchases of goods only and these goods are trading goods. Company deals in these goods and products. In this book, accountant does not record cash purchases and purchase of assets in which company does not deal. Suppose shop of furniture's product is furniture and its credit purchase will be recorded in purchase book. Its other name is bought book, purchase journal and purchase day book. This book is maintained on the basis of invoice. Accountant records quantity of products, rate and amount from invoice. Each transaction is recorded by giving invoice no.
Posting of Purchase Book
To fulfill double entry system, purchase book will be posted two accounts. One account will be purchase account and other account will be creditor's account. In purchase account, we will write total of purchases on credit basis. We also open the creditors accounts by writing the name of creditor. Suppose, we have purchased goods on credit from madan lal. In madan lal account's credit side, we will write by purchases and will show Rs. 200. Like this, we open all creditor's account.
Advantages of Purchase Book
- With this book, we can find, how much goods have been bought by us?
- It also tells us, how much many has to whom?
- This book is also helpful to make final accounts.