B1: 5.03 Posting the Purchases, Purchases Returns & Discounts Received Day Books to the General Ledger

At the end of an accounting period, a bookkeeper will post the totals of the columns of its Purchases Day Book (“PDB”), its Purchases Returns Day Book (“PRDB”) and its Discounts Received Day Book (“DRDB”) to the General Ledger.

DAY BOOK	INFORMATION RECORDED IN THE DAY BOOK
PDB	Information from purchases invoices received from credit suppliers
PRDB	Information from purchases credit notes received from credit suppliers
DRDB	Information about prompt payment discounts received or taken from credit suppliers

a) The Purchases Day Book (“PDB”)

The column totals of the PDB record changes to the following liabilities and expenses of the business:

1. The total of the gross column records an increase in the business’ liabilities, specifically the amount of money it owes to its credit suppliers (i.e. the suppliers who provide it with goods and services on credit terms)
2. The total of the VAT column records an decrease in the business’ liabilities, specifically the amount of VAT owed by the business to HMRC
3. The total of the net column(s) records an increase in the business’ expenses, which could be purchases of raw materials or goods for resale or other types expenses incurred in the period

Posting list from the PDB to the General Ledger

The column totals will be posted as follows to the General Ledger

• The Gross column total will be recorded on the Credit side of the Purchases Ledger Control Account (i.e. the account where we calculate how much is owed by the business to its suppliers)
• The VAT column total will be recorded on the Debit side of the VAT Account (i.e. the account where we calculate how much the business owes in VAT to HMRC)
• The Net columns of the PDB will be recorded on the Debit sides of the appropriate expense account (i.e. the accounts where we calculate the value of the different types of business expenses in a period); e.g.
  • The net cost of raw materials or goods for resale would be posted to a Purchases account
  • The net cost of advertising would be posted to an Advertising account
  • The net cost of motor expenses would be posted to a Motor Expenses account
  • And so on…

Illustration

The totals of the columns of the above PDB would be posted to the General Ledger as follows:

The entries in the General Ledger accounts would appear as follows (note the descriptions used):

b) The Purchases Returns Day Book (“PRDB”)

The column totals of the PRDB record changes to the following liabilities and expenses of the business:

1. The total of the gross column records a decrease in the business’ liabilities, as the amount of money owed to its credit suppliers has fallen
2. The total of the VAT column records a increase in the business’ liabilities, specifically the amount of VAT owed by the business to HMRC
3. The total of the net column(s) record decreases in the business’ expenses, which will be recorded as returns for the period

Posting list from the PRDB to the General Ledger

The column totals will be posted as follows to the General Ledger

• The Gross column total will be recorded on the Debit side of the Purchases Ledger Control Account
• The VAT column total will be recorded on the Credit side of the VAT Account
• The Net column(s) will be recorded on the Credit side of the following accounts
  • Credit notes relating to the purchase of materials or goods for resale will be credited to Purchases Returns accounts (some bookkeepers would instead credit the Purchases account but it can be useful to calculate Purchases Returns separately from Purchases)
  • Credit notes for other types of cost will be credited to an appropriate expense account (e.g. the net amount from credit notes received for advertising, say, would be credited to the Advertising account)

Illustration (continued)

The totals of the columns of the above PRDB would be posted to the General Ledger as follows:

These postings would then appear in the General Ledger accounts as shown below. [Note that the entries from the PRDB are shown in blue and the entries from the PDB are shown in black]

c) The Discounts Received Day Book (“DRDB”)

The column totals of the DRDB record changes to the following assets, liabilities and expenses of the business:

1. The total of the gross column records a decrease in the business’ liabilities, as the amount of money owed to its credit suppliers has fallen
2. The total of the VAT column records a increase in the business’ liabilities, specifically the amount of VAT owed by the business to HMRC
3. The total of the net column(s) records the prompt payment discounts received from its credit suppliers in the period; this can be viewed as a decrease in the business’ expenses for the period

Posting list from the DARB to the General Ledger

The column totals will be posted to the General Ledger accounts as follows:

• The Gross column total will be recorded on the Debit side of the Purchases Ledger Control Account
• The VAT column total will be recorded on the Credit side of the VAT Account
• The Net column will be recorded on the Credit side of the Discounts Received Account

Illustration (continued)

The totals of the columns of the above DRDB would be posted to the General Ledger as follows:

These postings would then appear in the General Ledger accounts as shown below. [Note that the entries from the DRDB are shown in blue and the entries from the PDB and PRDB are shown in black]

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