When goods and services are returned for some reason or the other after purchasing, it is called purchase return. Purchase returns may be due to damage, wrong, defective, etc. Management of purchase returns is also as important as management of purchases because management of purchase returns helps in calculating the actual purchases, payments, revenue, stock, etc.
Purchase returns can be managed in two ways, one in a general way involving journal and ledger, the other using a subsidiary book. Businesses which have fewer transactions can adopt the normal method but businesses which have a large number of transactions need to adopt subsidiary books because, with the help of subsidiary books, it becomes easier to manage the transactions.
Table of Contents
What is Purchase Return Book?
Purchase return book is a subsidiary book of the journal that is used to record and manage purchase return transactions. Purchase return book is also known as return outward book. In this only credit purchase return transactions are recorded as it is part of the purchase book, and it is managed by a concerned person who has knowledge about it.
Purchase returns are done through debit and credit notes as it is used to manage the account balance, such as purchase returns, sales returns, discounts after sales, transaction errors, etc. The one who returns the goods issues a debit note because the party’s account would have been credited when he purchased the goods and the one who receives the returned goods issues a credit note because the party’s account would have been debited when he sold the goods.
Features of Purchase Return Book
Following are the features of purchase returns book:
1. Subsidiary Book:
Purchase Returns Book is a subsidiary book of Journal as it is used to reduce the workload of Journal and is used before Journal.
2. Only Credit Purchase Return:
Only credit purchase returns are recorded in the purchase return book because as per its concept, only credit purchase return transactions can be recorded in it. The second reason is that it is part of the purchase book.
3. Only Trade Purchase Return:
Only trade purchase returns are recorded in the purchase returns book. Trade returns mean return of raw materials, finished goods, etc. which are related to trade exchange. Returns of asset purchase are recorded and managed in the normal manner.
4. First Step:
Purchase return book is the first step in recording and managing purchase return transactions as all transactions are recorded directly through the source document. Purchase return book is created/maintained before the journal book and when it is closed a journal entry is passed.
5. Easy Management:
With the help of purchase return book, management of purchase returns becomes easy as it is managed by the concerned person who has knowledge about the purchase return transactions and the purchase return book.
6. Error Reduction:
The purchase return book helps in reducing errors as only purchase return transactions are recorded in it and it is managed by the concerned person who has knowledge about it. When the same person does the same work again and again, the chances of making mistakes in his work are reduced.
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QNA/FAQ
Q1. What is Purchase Return Book?
Ans: Purchase return book is a subsidiary book of the journal that is used to record and manage purchase return transactions.
Q2. By what name is purchase return book also known?
Ans: Purchase return book is also known as return outward book.
Q3. Is purchase return book a subsidiary book?
Ans: Yes, purchase returns book is a subsidiary book of journal as it is used to reduce the workload of journal and it is prepared before Journal.
Q4. Are only trade purchase return transactions recorded in the purchase returns book?
Ans: Yes, only trade purchase return transactions are recorded in the purchase return book.
Q5. Write the features of purchase return book.
Ans: Following are the features of purchase returns book:
1. Purchase returns book is a subsidiary book.
2. Only credit purchase returns are recorded in the purchase returns book.
3. Only trade purchase returns are recorded in the purchase returns book.
4. Purchase returns book is the first step in recording purchase return transactions.
5. Purchase return book helps in the easy management of purchase return transactions.
6. Purchase return book helps in reducing errors.
