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Confused about purchase returns-someone please help?

I have been looking at some practice questions, and came across 1 which is about purchase returns. It is based on an analysed purchase book.
In the answer the purchase returns are returned to their analysed categories accounts - stationary, etc . There isn't a purchase returns account.

I'm I right to assume that analysed purchase returns are returned to the analysed double entry accounts- e.g stationary, Books, etc, rather than a general 'purchase returns' account?

Also, why are 'purchase returns' not just recorded in the other side of the 'purchases' account?

Comments

  • kelsmickkelsmick AberdeenRegistered Posts: 89
    The purchase returns are returned from the double entry accounts otherwise the figure of that account wouldn’t be true. Say you purchased £500 of stationary but returned £300 of that, if you didn't return the £300 from the stationary account it would still show a stationary expense of £500 which isn't a true reflection on the companies accounts and expenditure but you would have £300 in a purchase returns account which If you just had a general purchase returns account then it would cause more work at month/year end doing adjustments to get the correct expenditure figures per account.

    The purchase returns are a separate account so aren't recorded on the other side of purchases. It just helps keep everything neat if there is a separate ledger account for each category.
    www.essencebookkeeping.co.uk
    shaunpoll
  • crispycrispy Trusted Regular SouthamptonRegistered Posts: 456
    Hello,

    Don't know if this helps but in accounting the term 'Purchases' would refer to items which are brought for re-sale or for production into goods for resale (eg. Raw Materials or Finshed Goods), therefore the Purchase Returns account would contain items brought for resale which have been rejected / returned and to the supplier. You could just credit any returns to the Purchases account but it may be better to have a separate account for analytical purposes.

    shaunpoll
  • shaunpollshaunpoll Registered Posts: 34
    Thank you both of you, that's what I assumed after looking at the question. I really just wanted to check it was right!
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