Why to maintain Purchase Returns and Sales Returns Accounts.

Dear Sir,

How are you.
I would like to ask you one journal entry question as i am confused:-

There is a purchase of Rs.10,000/- from M/s Ram enterprises on credit for which the journal entry should be ;-

Purchase a/c Dr 10,000
To Ram Enterprises a/c 10,000


There is a Purchase return of Rs.5,000 fro the same for which the required journal entry would be :-

Ram enterprises a/c Dr 5,000
To Purchase Return A/c 5,000

my query is that this purchase return entry could also be formed as the one below or not :-

Ram enterprises a/c Dr 5,000
To Purchase a/c 5,000

Kindly clarify

asked Dec 23, 2015 in Subsidiary Books by keshav228 (12 points) 438 views

1 Answer

0 votes
Dear Amit, there is no problem in the entry you have suggested.  For taking managerial decisions you need a lot of information.  This is the reason we maintain separate accounts for Purchase Returns and Sales Returns though they are deducted from Purchase A/c and Sales A/c respectively in the Trading A/c.  By keeping a separate account for Purchase Returns and Sales Returns we will be able to know the amount of goods sent back and received back from customers.  If these figures sometime go beyond the normal levels, then we need to investigate the reasons for that because enhanced figures may point towards the inefficiency of Purchase and Sales Departments.
answered Dec 24, 2015 by jbsclasses (3,971 points)