Purchases, Sales and Returns Books (with debit and credit notes)
- Decide which transactions go into the purchases, purchases return, sales and sales return books
- Prepare these books with trade discount and post them to the ledger
- Understand debit notes and credit notes and who prepares them
- Prepare an analytical purchases/sales book with CGST, SGST and IGST columns
In the last two lessons, every rupee of cash and bank went into the cash book. But half of business happens on credit: “Bhaiya, maal bhej do, payment next month.” Today we meet four more special books for these credit dealings in goods: the Purchases Book, Purchases Return Book, Sales Book and Sales Return Book. You will also learn the two small papers that travel with returns, the debit note and the credit note. The good news: these books are very easy to write. The only real skill is deciding what goes in and what stays out.
1. The golden filter: credit + goods
Gupta Stationery in Aligarh buys registers, pens and notebooks to resell. In April it also buys a steel almirah for the shop on credit, and some files for cash. Its accountant, Pooja, keeps four special registers. She asks two questions for every bill: “Is it credit?” and “Is it goods we deal in?” Only if both answers are “yes” does the bill go into the purchases book. Cash deals go to the cash book; credit purchase of the almirah (an asset) goes to the journal proper.
Goods = items the business buys in order to sell (its stock-in-trade). For a stationery shop, notebooks are goods; the almirah and computer are assets, not goods.
| Transaction | Which book? |
|---|---|
| Goods bought on credit | Purchases Book |
| Goods bought for cash / by cheque / UPI | Cash Book |
| Asset (furniture, machine) bought on credit | Journal Proper |
| Goods returned to a supplier | Purchases Return Book |
| Goods sold on credit | Sales Book |
| Goods sold for cash / by cheque / UPI | Cash Book |
| Old asset sold on credit | Journal Proper |
| Goods returned by a customer | Sales Return Book |
“Udhaar + Maal = Special book.” If either word is missing (cash, or not goods), the transaction goes elsewhere.
2. Purchases (Journal) Book
Purchases Book: a book in which only credit purchases of goods are recorded. Its source document is the invoice (bill) received from the supplier.
Format:
| Date | Invoice No. | Name of Supplier (Account to be credited) | L.F. | Amount ₹ |
|---|---|---|---|---|
The amount written is the net amount of the invoice, i.e. after deducting trade discount. Trade discount is never written separately in the books. (Some businesses add a “Details” column to show the calculation; that is fine.)
Apr 3 Bought from Mehta Paper Mills (Invoice 451): 200 registers @ ₹60 and 500 gel pens @ ₹10, trade discount 10% · Apr 9 Bought from Kapoor Brothers (Invoice 88): 100 geometry boxes @ ₹120, trade discount 5% · Apr 15 Bought a steel almirah for the shop on credit from Singh Furniture ₹14,000 · Apr 18 Bought 50 files @ ₹30 for cash from Jain Traders · Apr 24 Bought from Mehta Paper Mills (Invoice 502): 300 notebooks @ ₹40, trade discount 10%.
Prepare the purchases book.
- Filter: Apr 15 is an asset (journal proper). Apr 18 is a cash purchase (cash book). Only Apr 3, 9 and 24 go in.
- Apr 3: 12,000 + 5,000 = 17,000; less 10% (1,700) = ₹15,300.
- Apr 9: 12,000 less 5% (600) = ₹11,400.
- Apr 24: 12,000 less 10% (1,200) = ₹10,800.
- Total = 15,300 + 11,400 + 10,800 = ₹37,500.
| Date | Invoice No. | Name of Supplier | L.F. | Amount ₹ |
|---|---|---|---|---|
| 2026 Apr 3 | 451 | Mehta Paper Mills | 15,300 | |
| Apr 9 | 88 | Kapoor Brothers | 11,400 | |
| Apr 24 | 502 | Mehta Paper Mills | 10,800 | |
| Apr 30 | Purchases A/c Dr. | 37,500 |
2.1 Posting the purchases book
- Each supplier’s account is credited (usually daily) with the amount of his invoice: “By Purchases A/c”.
- The monthly total is debited to Purchases A/c: “To Sundries as per Purchases Book”.
| Date | Particulars | J.F. | ₹ | Date | Particulars | J.F. | ₹ |
|---|---|---|---|---|---|---|---|
| 2026 Apr 3 | By Purchases A/c | 15,300 | |||||
| Apr 24 | By Purchases A/c | 10,800 |
| Date | Particulars | J.F. | ₹ | Date | Particulars | J.F. | ₹ |
|---|---|---|---|---|---|---|---|
| 2026 Apr 30 | To Sundries as per Purchases Book | 37,500 |
Notice the double entry is complete: total debit ₹37,500 (Purchases) = total of the credits to the suppliers (15,300 + 11,400 + 10,800).
Ali Fashions, April 2026: Apr 2 Bought from Ali Garments 30 shirts @ ₹250 and 20 jeans @ ₹400, trade discount 10% · Apr 9 Bought goods for cash ₹6,000 · Apr 14 Bought from Deepak Hosiery 40 vests @ ₹150, trade discount 5% · Apr 20 Bought a sewing machine on credit from Usha Dealers ₹9,000 · Apr 26 Bought from Ali Garments 15 jackets @ ₹300. What is the total of the purchases book (in ₹)?
3. Purchases Return (Return Outwards) Book
Goods may be sent back to a supplier because they are defective, damaged, of the wrong quality or not as ordered. These returns outwards are recorded in the purchases return book.
3.1 Debit note
Debit note: a note prepared (in duplicate) by the buyer and sent to the supplier, saying “we have debited your account” with the value of goods returned (or with any extra amount recoverable from him). It is the source document of the purchases return book.
| Gupta Stationery, Aligarh DEBIT NOTE No. 07 Date: 12 April 2026 | |
| To: Mehta Paper Mills Goods returned: 20 registers (damaged in transit) @ ₹60 = ₹1,200, less trade discount 10% ₹120 | ₹1,080 |
| (Rupees one thousand and eighty only) Signature of the Manager | |
Format of the book:
| Date | Debit Note No. | Name of Supplier (Account to be debited) | L.F. | Amount ₹ |
|---|---|---|---|---|
| 2026 Apr 12 | 07 | Mehta Paper Mills | 1,080 | |
| Apr 27 | 08 | Kapoor Brothers (5 geometry boxes @ ₹120 less 5%) | 570 | |
| Apr 30 | Purchases Return A/c Cr. | 1,650 |
Returns are valued at the same trade discount as the original purchase. 20 registers @ ₹60 are not returned at ₹1,200 but at ₹1,080, because we paid only 90% for them.
Posting: each supplier’s account is debited (“To Purchases Return A/c”), and the periodic total is credited to Purchases Return A/c (“By Sundries as per Purchases Return Book”).
4. Sales (Journal) Book
Sales Book: a book in which only credit sales of goods are recorded. Its source document is the copy of the sales invoice issued to the customer. Cash sales go to the cash book.
| Date | Invoice No. | Name of Customer (Account to be debited) | L.F. | Amount ₹ |
|---|---|---|---|---|
- Filter: Apr 22 (cash) → cash book. Apr 28 (asset, not goods) → journal proper.
- Apr 5: 4,000 + 1,500 = 5,500; less 5% (275) = ₹5,225.
- Apr 11: 6,000 less 10% (600) = ₹5,400.
- Apr 20: 80 × 55 = ₹4,400.
- Total = ₹15,025.
| Date | Invoice No. | Name of Customer | L.F. | Amount ₹ |
|---|---|---|---|---|
| 2026 Apr 5 | 101 | Sunrise Public School | 5,225 | |
| Apr 11 | 102 | Rao Book Depot | 5,400 | |
| Apr 20 | 103 | Sunrise Public School | 4,400 | |
| Apr 30 | Sales A/c Cr. | 15,025 |
Posting: each customer’s account is debited (“To Sales A/c”), usually daily, and the monthly total is credited to Sales A/c (“By Sundries as per Sales Book”).
| Date | Particulars | J.F. | ₹ | Date | Particulars | J.F. | ₹ |
|---|---|---|---|---|---|---|---|
| 2026 Apr 30 | By Sundries as per Sales Book | 15,025 |
5. Sales Return (Return Inwards) Book and credit note
Credit note: a note prepared by the seller and sent to the customer, saying “we have credited your account” for goods returned by him (or for any allowance given). It is the source document of the sales return book. It is traditionally written in red ink.
| Date | Credit Note No. | Name of Customer (Account to be credited) | L.F. | Amount ₹ |
|---|---|---|---|---|
| 2026 Apr 14 | 21 | Rao Book Depot (4 geometry boxes @ ₹150 less 10%) | 540 | |
| Apr 26 | 22 | Sunrise Public School (10 notebooks @ ₹55) | 550 | |
| Apr 30 | Sales Return A/c Dr. | 1,090 |
Posting: each customer’s account is credited (“By Sales Return A/c”), and the total is debited to Sales Return A/c (“To Sundries as per Sales Return Book”).
| Point | Debit Note | Credit Note |
|---|---|---|
| Prepared by | Buyer (for purchase returns) | Seller (for sales returns) |
| Message | “Your account has been debited” | “Your account has been credited” |
| Book it supports | Purchases Return Book | Sales Return Book |
| Colour (traditionally) | Black / blue ink | Red ink |
When Gupta Stationery returns registers, it sends a debit note; Mehta Paper Mills in reply may send a credit note. One return, two notes: the buyer debits the seller, the seller credits the buyer.
A customer who bought goods on credit sends back some damaged pieces, and we issue him a credit note. In which book is this recorded?
6. GST in the special books: the analytical purchases and sales book
Under GST, a registered dealer pays tax on purchases and collects tax on sales. NCERT shows extra columns in the purchases and sales books for this. The rule from Chapter 3 still applies:
- Within the same state (intra-state): CGST + SGST (half each). Between states (inter-state): IGST.
- Tax paid on purchases → Input CGST/SGST/IGST A/c (debited). Tax collected on sales → Output CGST/SGST/IGST A/c (credited).
Apr 7 From Arora Telecom, Delhi (Invoice 7781): 10 mobile phones @ ₹8,000, trade discount 10%, IGST 18% · Apr 16 From Kanpur Accessories, Kanpur (Invoice 342): 100 chargers @ ₹400, trade discount 5%, CGST 9% and SGST 9%. Prepare an analytical purchases book.
- Arora Telecom: 80,000 − 8,000 = 72,000. Delhi → UP is inter-state: IGST 18% of 72,000 = 12,960. Invoice total = 84,960.
- Kanpur Accessories: 40,000 − 2,000 = 38,000. Kanpur → Aligarh is intra-state: CGST 9% = 3,420; SGST 9% = 3,420. Total = 44,840.
- Column totals: Total 1,29,800; Purchases 1,10,000; CGST 3,420; SGST 3,420; IGST 12,960. Check: 1,10,000 + 3,420 + 3,420 + 12,960 = 1,29,800. ✔
| Date | Inv. No. | Supplier | Total ₹ | Purchases ₹ | CGST ₹ | SGST ₹ | IGST ₹ |
|---|---|---|---|---|---|---|---|
| 2026 Apr 7 | 7781 | Arora Telecom, Delhi | 84,960 | 72,000 | — | — | 12,960 |
| Apr 16 | 342 | Kanpur Accessories, Kanpur | 44,840 | 38,000 | 3,420 | 3,420 | — |
| Apr 30 | Total | 1,29,800 | 1,10,000 | 3,420 | 3,420 | 12,960 |
The sales book works the same way in reverse. If Verma Mobile Store sells 5 phones @ ₹10,000 on credit to Mathur Mobiles, Agra (intra-state), the invoice is 50,000 + CGST 4,500 + SGST 4,500 = ₹59,000: Mathur Mobiles is debited ₹59,000; Sales A/c is credited ₹50,000, Output CGST A/c ₹4,500 and Output SGST A/c ₹4,500. A sale of 50 chargers @ ₹550 to Bansal Telecom, Jaipur (inter-state) gives 27,500 + IGST 4,950 = ₹32,450, with Output IGST A/c credited ₹4,950.
Returns with GST reverse the tax too: a debit note for goods returned to Kanpur Accessories would include the CGST and SGST on the returned goods, and those amounts would be credited back to the Input CGST and Input SGST accounts.
If the Apr 16 purchase from Kanpur Accessories (₹38,000 + CGST ₹3,420 + SGST ₹3,420) were recorded as a single journal entry, what would it be?
| Date | Particulars | L.F. | Dr (₹) | Cr (₹) |
|---|---|---|---|---|
| 2026 Apr 16 | Purchases A/c Dr. | 38,000 | ||
| Input CGST A/c Dr. | 3,420 | |||
| Input SGST A/c Dr. | 3,420 | |||
| To Kanpur Accessories A/c | 44,840 | |||
| (Being goods purchased on credit, Invoice 342, with CGST and SGST @ 9% each) |
7. Advantages of special purpose books
- Division of labour: different clerks can write different books at the same time.
- Saves time and posting: only the periodic total is posted to Purchases, Sales and Returns accounts, not every entry.
- Easy reference and control: the owner can see total credit sales or credit purchases of the month at a glance.
- Fewer errors and easier checking: similar items are grouped, so mistakes stand out.
- Purchases Book
- Cash Book
- Journal Proper
- Sales Book
- the credit of Sales A/c
- the debit of customers’ accounts
- the credit of Sales Return A/c
- the debit of Sales Return A/c
8. Exam tips
- Show the trade discount calculation in a “Details” column or in working notes, but write only the net amount in the amount column.
- Write a one-line note for every excluded transaction (“Cash purchase – recorded in cash book”) if the question lists them. It shows the examiner you filtered consciously.
- Posting direction: Purchases book → suppliers Cr., Purchases A/c Dr. Sales book → customers Dr., Sales A/c Cr. Returns do the opposite.
📌 Points to remember (Quick Revision)
- Purchases/Sales Book: only credit purchases/sales of goods; cash deals go to the cash book, assets on credit go to the journal proper.
- Amounts are entered net of trade discount; returns use the same trade discount rate.
- Posting: purchases book → suppliers Cr., total Dr. to Purchases A/c; sales book → customers Dr., total Cr. to Sales A/c.
- Purchases Return Book (debit note, prepared by buyer): suppliers Dr., total Cr. to Purchases Return A/c.
- Sales Return Book (credit note, prepared by seller): customers Cr., total Dr. to Sales Return A/c.
- Analytical books add CGST, SGST, IGST columns: input tax on purchases (Dr.), output tax on sales (Cr.).
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