Purchase Journal/ day books are preprinted in a specific format. Every credit transaction is written separately in chronological order (First comes the first basis). From the above picture, we can see that the fifth (5th) Column is a Folio column and is empty. This column is filled at the time when entries from the Purchase day book are posted to the Purchase Ledger. The Name and Page Number of the ledger where this entry is recorded is entered here.

Entries in this purchase journal are made based on data received from invoices and internal documents like Goods Received Notes (GRN) etc. When goods are bought at credit, the supplier sends its invoice along with the goods. The invoice contains details of goods, list price, tax, credit terms, and any discount allowed (cash, trade), etc.

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Cash Purchases

We have learned that the credit purchases are recorded in the Purchase daybook. But What about the purchase made in cash. Do purchases made on cash remain unrecorded???

The reason to record only credit purchases in Purchase Journal is that any cash paid against the cash purchase is entered in the Cash Book. Therefore there is no need to record a purchase twice. This twice recording may result in duplication of purchases as at the time of posting from Journal to Purchase Ledger. 

We may by mistake post the same cash purchase from the cash book and Purchase book if cash purchase is recorded in Purchase Journal resulting in an overstatement of Purchases. To avoid this duplication, only credit purchases are recorded in Purchase Journal.

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Columnar Purchase Journal/ Daybooks

 There are two common practices in businesses to record day to day purchases:-

I     To maintain a single book for all credit purchases including goods (to be re-sold) and general items (e.g. Stationary, Fixed assets, and other daily consumables for business use).II    To keep separate journals/ day books for recording purchases for goods and for general items.

Businesses with lower quantities of daily transactions may choose to keep a single purchase daybook. However, in order to accurately classify all the expenses, it is important that each type of credit purchase is recorded separately. 

This will help to sort the purchases and to post relevant expenses into accurate ledgers accordingly. 

For example, for a business selling stationery items, instead of recording a single entry for all the purchases from a single supplier, it is important to record one entry for stationary purchases for internal use and the other entry for the goods purchased to resell. Therefore an extra column (along with the total column) can be included in the purchase day book in which the amount of each type of purchase can be recorded.

 If the business was divided into departments or segments, it would be possible to have one column for each department instead of one purchase column. Thus, the total purchases for each department for the accounting period can be recorded. In fact, this book can have as many columns as you want. It all depends on the extent to which you want to analyze the credit purchase listed in the book.

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Internal Control on Purchase

Despite the size of a business, whether large or small, Purchase is one of the most prone areas to fraud. Every business shall put appropriate levels of internal control mechanism to reduce the chances of error either due to mistakes or fraud. 

It is a usual practice of many businesses that invoices are received one or two days later after the delivery of goods. Further, business activities are performed with the dispersed locations like the factory is situated on another place whereas the Head Office from where payment will be processed is another place. 

So to ensure that every this is in order and data is being recorded properly following controls shall be in place;

1. Purchase invoice received from supplier shall be checked against

• Goods Received Note (GRN) so it can be verified that items being invoiced are the same as received.
• Items received are of the same nature and quality as per the Demand sent (purchase order) 
• The rate entered in the invoice is in agreement with the contract or purchase order

2. The invoice shall be stamped when received with a section for each department

While ensuring compliance with the above-said controls, there shall be step by step checks performed by different persons

• One person confirmed that the goods were actually received (prepared GRN).
• The other person who placed the order shall confirm if the goods received are the same as ordered.
• A third person verifies that the prices and calculations on the invoice are correct, and in accordance with the original and agreed with purchase order.
• A fourth person verifies that the goods are in good condition and suitable for the purpose for which they were purchased (Quality Check).

Naturally, in small businesses, where the workforce is very limited all these control checks can not be established. However, still, it shall be ensured that the person authorized to make payments shall be separate from the person who ordered the goods.

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