Purchase transactions definitely occur in every business because without purchases the business cannot run and all purchase transactions are important for the business, so management of purchase transactions becomes very important for every business. The purchase transaction can be through credit, cash, and bank, etc., it entirely depends on the nature of the transaction and the parties.
If the transactions in the business are high or the business is capable then the business can adopt the concept of subsidiary books because subsidiary books help in managing the business transactions. In this, separate books are maintained for different types of transactions which are managed by the concerned person.
Table of Contents
What is a Purchase Book?
Purchase book is a subsidiary book used to record purchase transactions. In this, only credit transactions and transactions done for resale like raw materials, finished goods, etc. are recorded. Transactions other than goods and services such as purchase of assets etc. are not recorded in the purchase book, these types of transactions are recorded through normal method such as journal and ledger, etc.
All transactions done through cash and bank are recorded in the cash book. Ledger accounts have to be maintained even after using subsidiary books other than cash and bank transactions. if cash book is used then there is no need to maintain cash account and bank account in ledger.
Features of Purchase Book
Following are the features of purchase book:
1. Subsidiary Book:
Purchase book is a subsidiary book of journal as it is used to record and manage purchase transactions at the initial stage of accounting. The main objective of the purchase book is to reduce the workload of journal and ledger and to manage purchase transactions together at one place.
2. Only Purchase:
Only purchase transactions are recorded in the purchase book as its main purpose is to record and manage only purchase transactions whereas in the cash book both cash and bank transactions are recorded.
3. Only Credit Purchase:
Only credit purchases are recorded in the purchase book. If the purchase is made through cash and bank, then it is recorded in the cash book. For example, goods purchased in cash are recorded in the cash book, and goods purchased with a credit period are recorded in the purchase book.
4. Only Trade Purchase:
Only trade purchases are recorded in the purchase book. Trade purchase means purchases made for the purpose of earning profit by selling goods and services such as raw materials, finished goods and services, etc. Purchases other than trade purchases are recorded in the respective ledgers, such as asset purchases are recorded in the asset account.
5. Universal:
Purchase book is a universal concept because every big business or who is capable for it uses it. Wherever accounting process takes place, there is definitely mention of supporting books.
6. Error Reduction:
The purchase book helps in reducing the error as only purchase transactions are recorded in it and it is managed by the concerned person. If we record the transactions through normal methods like journal, ledger, etc. then the posiblity of error may increase as compared to purchase book.
7. Easy Management:
When purchase book is used then management of purchase transactions becomes easy as only purchase transactions are recorded in it and it is managed by the concerned person who has knowledge about the concept of purchase book and purchase transactions.
Read Also:
QNA/FAQ
Q1. What is a purchase book?
Ans: Purchase book is a subsidiary book used to record and manage trade purchase transactions like raw materials, finished goods, etc. Only credit transactions are recorded in this.
Q2. Is the purchase book helpful in reducing errors?
Ans: Yes, purchase book is helpful in reducing errors as only purchase transactions are recorded in it and it is managed by the concerned person.
Q3. Are only credit purchases recorded in the purchase book?
Ans: Yes, only credit purchases are recorded in the purchase book. Purchases made through cash and bank are recorded in the cash book.
Q4. Is purchase book a subsidiary book?
Ans: Yes, purchase book is a subsidiary book of journal as it is used to record and manage purchase transactions at the initial stage of accounting.
Q5. Write the features of purchase book.
Ans: Following are the features of purchase book:
1. Purchase book is a supporting book.
2. Only purchase transactions are recorded in the purchase book.
3. Only credit purchases are recorded in the purchase book.
4. Only trade purchases are recorded in the purchase book.
5. Purchase book is a universal concept.
6. Purchase book helps in reducing errors.
7. Purchase book helps in easy management.
