Tag: elements of book keeping and accountancy

The source document, on the basis of which the transaction are recorded in the Purchase book, is called inward invoice, bill, or credit memo. It is received by a firm from the supplier of goods when the credit purchases are made. It contains the quality of the goods, rate, amount etc. and serial number that is recorded in the purchase book.

Purchase return day book is also called as Purchase return book or Purchase return journal or Purchase return register. All purchase return vouchers are recorded in purchase return day book. The totals of purchase returns book is posted to the ledger on credit side of the Purchases return A/c.

Return of goods, purchased on credit is recorded under Purchase Return Book or return outward book. Purchase book shows a debit balance, so purchase return book will show credit balance. While returning the goods buyer sent a "debit note" to the seller. The debit note contains the quantity of returned goods and reason of returning goods.

When defective goods are returned by the customer a note is prepared by a supplier which is called as "credit note". This note is prepared and sent to customer indicating that his/her account has been credited in firm's books. A duplicate copy of the credit note is retained and used as a source document for recording the transactions in the books of accounts. 

When goods are returned, a debit note is prepared and is sent to the supplier with the returned goods. An original copy is sent to the supplier, informing him of the amount for which his account has been debited on account of the returned goods. A duplicate copy of the debit note becomes the source document, on the source document, on the basis of which entries are recorded in the Purchases Returned Book. Thus, a debit note is required for recording the transactions in the Purchases Return Book.

Current cost of machinery refers to the cost of machinery on today's date. 

Goods sold on credit when returned by the customer is recorded in returned inward book or sales return book. Sales return book shows a debit balance as it is reverse to the sales, which has credit balance. When the goods are returned by the customer one note is prepared which is called as "Credit note". The returned outward book is used to record return of goods purchased on credit.

A debit note is prepared when the goods are returned and is sent to the supplier with the returned goods. An original copy is sent to the supplier and on the basis of duplicate copy the transaction is recorded in the purchase return book. debit note informs supplier about the amount for which his account has been debited on account of returned goods. Thus, a debit note is required for recording the transactions in the purchase return book and not credit note is used to record the transaction related to sales returned.

The Journal Entry will be..

Cash a/c Dr. 1200
Bad dept  a/c Dr 800
To Ram a/c.                  2000