Purchase Book

The Purchase Book (also called the Purchases Journal or Purchases Day Book) records only credit purchases of goods — goods that the business normally deals in, meant for resale or for use in production. It does NOT record cash purchases (which go through the Cash Book) and it does NOT record the credit purchase of an asset not meant for resale, such as furniture or a machine (which goes through the Journal Proper, covered later in this chapter).

Format of the Purchase Book

When goods attract GST, the single "Amount" column is expanded into detail columns, so that the taxable value and the tax can each be posted to the correct ledger account:

Treatment of Trade Discount: trade discount is a reduction from the supplier's list/catalogue price, usually to encourage bulk buying. It is always deducted before recording, and is NEVER shown as a separate item anywhere in the books — only the net (list price less trade discount) figure is treated as the taxable value of the purchase.

Treatment of GST: GST paid on a purchase is not a cost to the business — it is generally a tax the business can later set off against the GST it collects on its own sales (Input Tax Credit). For a purchase within the same state, GST is split into CGST (Central GST) and SGST (State GST) at equal rates; for a purchase from another state, a single IGST (Integrated GST) applies instead. The Purchase Book therefore carries the taxable value and the tax amount(s) in separate columns, so that at the end of the period:

• the Taxable Value total is posted to the debit of the Purchases Account,
• the CGST/SGST (or IGST) totals are posted to the debit of the Input CGST Account / Input SGST Account (an asset, since it can be reclaimed), while
• each supplier's personal account is credited individually with the Net (GST-inclusive) Amount actually payable to them.

Illustration 1 — Preparing a Purchase Book

Enter the following transactions of a trader (goods purchased on credit; assume GST @ 12%, i.e. CGST 6% + SGST 6%, for illustration) in the Purchase Book, and show the ledger postings.

• Jan 3 — Purchased goods from Mahesh Traders, list price ₹20,000, less trade discount 10%, Invoice No. 101.
• Jan 10 — Purchased goods from Suresh & Co., list price ₹15,000, less trade discount 5%, Invoice No. 205.
• Jan 18 — Purchased goods from Ramesh Enterprises, list price ₹10,000, no trade discount, Invoice No. 88.

Working: Mahesh Traders — trade discount = 10% of ₹20,000 = ₹2,000; taxable value = ₹18,000; CGST 6% = ₹1,080; SGST 6% = ₹1,080; net = ₹20,160. Suresh & Co. — trade discount = 5% of ₹15,000 = ₹750; taxable value = ₹14,250; CGST = ₹855; SGST = ₹855; net = ₹15,960. Ramesh Enterprises — no discount; taxable value = ₹10,000; CGST = ₹600; SGST = ₹600; net = ₹11,200.

Purchase Book, for January

| Date | Particulars | Invoice No. | L.F. | Gross Amount (₹) | Trade Discount (₹) | Taxable Value (₹) | CGST (₹) | SGST (₹) | Net Amount (₹) |

|---|---|---|---|---|---|---|---|---|---| …