Subsidiary Books: Purchase Book MCQs Quiz | Class 9

Understanding the Purchase Book

The Purchase Book, also known as the Purchase Journal or Invoice Book, is a type of subsidiary book. Subsidiary books are special journals used to record specific types of transactions in a chronological order. This simplifies the recording process and avoids cluttering the main journal (Journal Proper). The Purchase Book is specifically designed to record all credit purchases of goods.

Key Concepts and Rules

• What are ‘Goods’? In accounting, ‘goods’ refer to the items or products that a business buys with the intention of reselling. For a stationery shop, items like pens, notebooks, and papers are goods. For a furniture dealer, tables and chairs are goods.
• Credit Purchases Only: The Purchase Book only records purchases made on credit. If goods are bought for cash, the transaction is recorded in the Cash Book.
• Exclusion of Assets: The purchase of assets (like machinery, furniture, computers for office use) is not recorded in the Purchase Book, even if bought on credit. Such transactions are recorded in the Journal Proper.
• Source Document: The primary document used to make an entry in the Purchase Book is the Purchase Invoice received from the supplier.
• Trade Discount: If a trade discount is given by the supplier, it is deducted from the list price on the invoice itself. The entry in the Purchase Book is always made with the net amount (List Price minus Trade Discount). Trade discount is not recorded as a separate entry in the books.

Format of a Purchase Book

A standard Purchase Book has the following columns:

Posting from the Purchase Book

The process of transferring entries from the Purchase Book to the main ledger is called posting. It involves two steps:

1. Posting to Personal Accounts: Each individual transaction is posted to the credit side of the respective supplier’s (creditor’s) account in the ledger. This is done regularly, often daily. The entry would be “By Purchases A/c”.
2. Posting to Purchase Account: At the end of a period (e.g., a month), the ‘Amount’ column of the Purchase Book is totaled. This total amount is then posted to the debit side of the Purchase Account in the ledger. The entry would be “To Sundries as per Purchase Book”.

Quick Revision Points

• The Purchase Book is a book of original entry.
• It records only credit purchases of goods meant for resale.
• Cash purchases of goods are recorded in the Cash Book.
• Credit purchases of assets are recorded in the Journal Proper.
• The total of the Purchase Book represents the total credit purchases for a period and is debited to the Purchase Account.

Extra Practice Questions

1. A trade discount is:
   a) Recorded in the cash book
   b) Shown as a deduction in the invoice and not recorded separately
   c) Credited to Discount Received Account
   d) Recorded in the Journal Proper
2. The periodic total of the Purchase Book indicates:
   a) Total cash purchases
   b) Total credit sales
   c) Total credit purchases of goods
   d) Total purchase of assets
3. Which of the following would be recorded in the Purchase Book of a furniture dealer?
   a) Purchase of a computer for office use on credit
   b) Purchase of timber for cash
   c) Purchase of chairs and tables on credit for resale
   d) Purchase of a delivery van on credit
4. When posting from the Purchase Book, the accounts of suppliers are:
   a) Debited
   b) Credited
   c) Not affected
   d) Balanced
5. What does “L.F.” stand for in the format of a Purchase Book?
   a) Loan Folio
   b) Ledger File
   c) Ledger Folio
   d) Local File

Answers: 1-b, 2-c, 3-c, 4-b, 5-c