A credit purchase is first recorded in the purchases day book, from the supplier’s invoice, and then posted to two places: the purchases account and the supplier’s account. Only goods bought for resale, on credit belong in this book.
This skill belongs to source evidence and original entry. You should already know what an invoice does to the amount owed.
What does the purchases day book do?
It is a list, not a ledger account. Its job is to collect all credit purchase invoices in date order so that you post one total to purchases instead of one entry per invoice.
Each line takes four items from the invoice: date, supplier, invoice number and the net amount after trade discount.
How do you record and post?
- Check the invoice is for goods for resale and is on credit.
- Write one line in the day book with the net amount.
- Total the column at the end of the month.
- Post the total as a debit in the purchases account, in the general ledger.
- Post each invoice as a credit in that supplier’s account, in the payables ledger.
- Check that the credits to suppliers add up to the debit to purchases.
Worked example
Aina Stationery receives these documents in March. All are on credit.
- 1 March: invoice 2041 from Bintang Paper Supplies, RM480 list less 10% trade discount.
- 5 March: invoice K-118 from Kasih Pens Trading, 25 boxes of pens at RM14, less 10%.
- 12 March: invoice 2067 from Bintang, 30 files at RM6.50, less 10%.
Net amounts. Invoice 2041: 480 − 48 = RM432.00. Invoice K-118: 25 × 14 = 350, less 35, so RM315.00. Invoice 2067: 30 × 6.50 = 195, less 19.50, so RM175.50.
Purchases day book, March
| Date | Supplier | Invoice | Net amount (RM) |
|---|---|---|---|
| 1 Mar | Bintang Paper Supplies | 2041 | 432.00 |
| 5 Mar | Kasih Pens Trading | K-118 | 315.00 |
| 12 Mar | Bintang Paper Supplies | 2067 | 175.50 |
| Total | 922.50 |
Posting. Purchases account, debit side: 31 March, purchases day book, RM922.50.
Payables ledger, credit side:
| Account | Date | Details | Credit (RM) |
|---|---|---|---|
| Bintang Paper Supplies | 1 Mar | Purchases day book | 432.00 |
| Bintang Paper Supplies | 12 Mar | Purchases day book | 175.50 |
| Kasih Pens Trading | 5 Mar | Purchases day book | 315.00 |
Bintang’s balance is 432.00 + 175.50 = RM607.50. Adding Kasih’s RM315.00 gives 922.50, which equals the debit to purchases. The double entry balances.
Check the arithmetic a second way: 432 + 315 = 747, and 747 + 175.50 = 922.50.
The mistake to watch for
A common slip is to put every invoice into the purchases day book, including one for something the business will keep.
Mistaken entry: On 20 March Aina receives invoice 77 for RM640 from Nadi Office Furniture for an office chair. The student adds it to the day book, making the total RM1,562.50.
A chair is not bought to resell. It is a non-current asset, so purchases are overstated by RM640.
The correction is to ask “will this be sold on, or used here?” The chair is recorded through the journal, with the supplier credited and the asset account debited, and the day book total stays at RM922.50.
Check yourself
Try these, then open each answer.
1. A day book has net invoices of RM120.00, RM85.50 and RM214.50. What is posted to the purchases account, and on which side?
Show answer
Total = 120.00 + 85.50 + 214.50 = RM420.00, posted to the debit side of the purchases account.
2. Invoice from a supplier shows 10 boxes at RM30, less 20% trade discount. What is entered in the day book?
Show answer
List 10 × 30 = 300. Discount 20% of 300 = 60. Net = RM240.
3. Is a bought-on-credit photocopier for the shop entered in the purchases day book?
Show answer
No. It is kept for use, not for resale, so it is a non-current asset and not a purchase.
Where this leads next
Returned goods change this picture, so read handling a returned item without reversing the wrong account next. The double-entry and ledger trainer lets you test postings on your own examples.
If your totals balance in class but go wrong in an unfamiliar question, online one-to-one Accounting tuition can help a teacher find the precise step that slips.