Purchases and Sales Book — Important Questions

Debit side

Step 1: In accounting, when goods are purchased, the Purchases Account increases. Step 2: Purchases Account is a nominal account. When purchases increase, it is debited (Debit what comes in / Debit all expenses and losses). Step 3: The total of the Purchases Book represents total credit purchases of goods for the period. Step 4: This total is posted to the DEBIT side of the Purchases Account in the ledger. Step 5: Individual supplier accounts are credited separately. So: Purchases Account → Debit; Supplier's Account → Credit.

Debit side of customer's account

Step 1: When goods are sold on credit, the customer owes money to the business — the customer becomes a debtor. Step 2: A debtor's account is a personal account. When a person becomes a debtor, their account is debited (Debit the receiver). Step 3: Each individual customer's account is therefore debited with the amount of goods sold to them on credit. Step 4: The Sales Account (revenue) is credited with the total of the Sales Book periodically. Step 5: So: Customer's Account → Debit side; Sales Account → Credit side.

Rectification of errors in the books of accounts

Step 1: The Journal Proper is a residual book — it records all transactions that cannot be entered in any other subsidiary book. Step 2: Credit purchase of goods → Purchases Book. Step 3: Cash sales → Cash Book. Step 4: Return of goods to supplier → Purchases Returns Book. Step 5: Rectification of errors is a special entry that does not fit in any other subsidiary book, so it is recorded in the Journal Proper along with opening entries, closing entries, adjusting entries, and credit purchase/sale of assets.

The customer returns goods that were sold on credit

Step 1: A Credit Note is issued by the seller (the business that originally sold the goods). Step 2: When a customer returns goods, the seller must reduce the amount the customer owes. Step 3: The seller credits the customer's account in their books (reducing the debtor balance). Step 4: To inform the customer of this, the seller sends a Credit Note — it tells the customer their account has been credited. Step 5: This triggers an entry in the Sales Returns Book (Returns Inward Book). Common mistake: Confusing who issues the Credit Note — it is always the SELLER, not the buyer.