Purchases Book

The Purchases Book records only credit purchases of goods — goods that the business normally deals in (trades in) or, for a manufacturer, raw materials meant for further processing. It never records: (i) a cash purchase of goods, which is recorded in the Cash Book, since paying cash means the transaction is settled immediately, not through a supplier's personal account; or (ii) the purchase of an asset not meant for resale — furniture, machinery, a delivery van bought for use in the business, even on credit — which is a Journal Proper entry, since such an asset is not 'goods' from this business's point of view.

The source document behind every Purchases Book entry is the Invoice (or Bill) received from the supplier. A typical format:

When the invoice shows a trade discount (a percentage reduction offered by the supplier off the catalogue/list price, usually to encourage bulk buying or as a standard concession to a class of buyer), it is deducted right there on the invoice itself, and only the net amount — after deducting trade discount — is entered in the Purchases Book. Trade discount is never journalised and never shown as a separate figure anywhere in the books of account; it simply never enters the accounting records at all, because from the buyer's point of view the effective (net) price IS the purchase price.

Posting: at the end of a period (commonly a month), the Purchases Book is totalled, and this single total is posted to the debit of the Purchases Account in the ledger. Each individual entry, however, is posted daily (or as convenient) to the credit of the respective supplier's personal account, since the business owes that specific supplier that specific amount.