Recording of Purchase Return

📌 CONCEPT: A purchase return is recorded in the accounting records to adjust the accounts when goods are returned to the supplier due to defects or other reasons, thereby reducing the cost of goods purchased.

📐 RULE / FORMULA: The purchase return is recorded by debiting the 'Return Outwards' account and crediting the 'Purchase Return Inwards' account, which in turn is debited to the 'Purchases Account' to reduce the cost of goods purchased.

💡 WORKED EXAMPLE: Kamal purchased goods worth ₹ 5,00,000 from a supplier on credit. Later, he returned goods worth ₹ 1,50,000 due to their damaged condition. To record the purchase return, we would debit the 'Return Outwards' account by ₹ 1,50,000 and credit the 'Purchase Return Inwards' account by ₹ 1,50,000. The 'Purchase Return Inwards' account is then debited by ₹ 1,50,000 to the 'Purchases Account' to reduce the cost of goods purchased.

⚠️ COMMON MISTAKE: Students often forget to debit the 'Return Outwards' account and credit the 'Purchase Return Inwards' account, which leads to an incorrect recording of the purchase return in the accounting records.