Examkin

Question

Difficulty: MediumPurchases Journal and Purchases Returns Journal

Zaria General Stores, a food retail business, engaged in the following transactions during August 2026:

• Aug 8: Purchased 4040 bags of rice for resale on credit from Usman Ltd at a list price of ₦400,000₦400,000, subject to a 10%10\% trade discount.
• Aug 12: Purchased an office computer on credit from Tech Solutions Ltd for ₦250,000₦250,000.
• Aug 15: Purchased 1010 cartons of cooking oil for resale for ₦100,000₦100,000 cash.

What is the total amount to be recorded in the Purchases Journal for August 2026?

  1. ₦360,000Answer
  2. B
    ₦610,000
  3. C
    ₦400,000
  4. D
    ₦460,000

Answer

The total amount to be recorded in the Purchases Journal is ₦360,000.
The Purchases Journal is used exclusively for recording credit purchases of goods intended for resale. The transaction on Aug 8 (4040 bags of rice for resale at ₦400,000₦400,000 list price) is subject to a 10%10\% trade discount (₦40,000₦40,000), yielding a net figure of ₦360,000₦360,000. The computer purchase on Aug 12 is a capital expenditure recorded in the General Journal, and the cash purchase on Aug 15 is recorded in the Cash Book.

Step-by-Step Solution

1
Identify transactions eligible for the Purchases Journal
Only the credit purchase of rice for resale on Aug 8 (₦400,000₦400,000 list price) qualifies.
The Purchases Journal strictly records credit purchases of goods intended for resale. Fixed assets bought on credit (Aug 12) go to the General Journal, and cash purchases (Aug 15) go to the Cash Book.
2
Calculate net invoice price after trade discount
₦400,000−(10%×₦400,000)=₦400,000−₦40,000=₦360,000₦400,000 - (10\% \times ₦400,000) = ₦400,000 - ₦40,000 = ₦360,000
Trade discounts are deducted on the invoice before recording in the book of prime entry.

Key Concept

Purchases Journal Scope and Trade Discount Deduction
Estimated Time:1m 30s
Rate this question

Topics

Purchases Journal and Purchases Returns Journal

More questions from this topic