Chapter 7 Purchases And Purchase Records

Jul 17, 2026

Uploaded by Violet

Chapter 7 focuses on how businesses obtain and manage purchases, emphasizing control of authorization, documentation, and accurate recording in accounting. It explains the purchase requisition as evidence of approved spending, outlines purchasing methods including verbal/telephone orders, internet orders with immediate payment, and supplier bidding for large expenditures. It then details key source documents—purchase orders, delivery notes/advices, and goods received notes—covering checks for quantity, condition, and discrepancies. It also introduces recording of purchases and purchase returns within the books of prime entry and aligns coverage with the syllabus objectives.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages22

Reading Time55 min

AccessFree to download

Chapter 7 PURCHASES AND PURCHASE RECORDS Most businesses purchase a wide variety of goods and services from suppliers. As a general rule, businesses prefer to buy goods and services on credit, although some small items might be purchased with notes and coins out of‘petty cash’. This chapter explains the typical procedures for ordering goods or services on credit, receiving delivery, receiving a purchase invoice, checking the invoice and identifying and sorting out any discrepancies. It also covers the recording of purchases and purchase returns in the books of prime entry. The chapter covers the syllabus area for purchases and purchase returns. | CONTENTS
1 Buying goods or services
2 Source documents
3 Suppliers’ invoices and supporting documents
4 Credit notes
5 Authorising and coding
6 Purchase day book
7 Purchase returns day book | | --- | | LEARNING OUTCOMES
At the end of this chapter, you should be able to:
identify and recognise source purchase and expenditure documents complete purchase invoices and process credit notes
calculate and record trade and settlement discounts
record transactions in a purchase day book and a purchase returns day book code purchases and supplier records and data. | 1 BUYING GOODS OR SERVICES The procedures for buying goods or services were explained in an earlier chapter but a brief reminder might be useful here. 1.1 PURCHASE REQUISITION Expenditure by a business must be properly authorised. If there were no rules about authorising spending, there would be nothing to stop any employee of a business making whatever expenditure he or she chose. The rules for authorisation vary from one organisation to another, and it is important to know who can authorise different types and amounts of expenditure. Expenditure should not be approved for payment unless there is evidence that it has been properly authorised. Proper authorisation is normally evidenced by a piece of paper, signed by the person giving the authority to spend. This authorising document is often called a purchase requisition. The expenditure should be approved by an individual who is in a position to authorise it. Once authorised, a purchase requisition becomes an authority to spend. 1.2 METHODS OF PURCHASING A business might buy goods or services in different ways. • Once authority has been obtained, an item can be ordered verbally, by telephone. For example, suppose that there is flooding in a washroom due to a blocked drain. When authority has been obtained to get the fault repaired, a plumber can be called in by telephone. • Occasionally, an item might be purchased by internet once the authority has been given, although the person making the purchase will probably be required to pay immediately by credit card. • Business to business transactions also take place over the internet with customers buying from suppliers. • For large expenditure, an organisation might ask one or more supp

Jul 17, 2026

Uploaded by Violet