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Difficulty: MediumPurchases Journal and Purchases Returns Journal

On 12 June 2026, Mabera Merchants bought goods costing ₦500,000 on credit from Danladi & Sons, subject to a 10% trade discount. On the same day, the firm also bought office furniture on credit for ₦120,000 from Woodworks Ltd. What is the total amount to be recorded in Mabera Merchants' Purchases Journal for these transactions?

  1. ₦450,000Answer
  2. B
    ₦570,000
  3. C
    ₦500,000
  4. D
    ₦620,000

Answer

₦450,000
The Purchases Journal is used exclusively to record credit purchases of goods intended for resale. The net amount recorded for the goods is calculated after deducting the 10% trade discount: ₦500,000−(10%×₦500,000)=₦450,000₦500,000 - (10\% \times ₦500,000) = ₦450,000. Office furniture is a non-current asset (capital expenditure) and must be entered in the General Journal.

Step-by-Step Solution

1
Calculate the net price of goods purchased for resale
Gross cost = ₦500,000. Trade discount = 10% of ₦500,000 = ₦50,000. Net price = ₦500,000 - ₦50,000 = ₦450,000.
Trade discounts are deducted immediately before recording transactions in subsidiary books.
2
Identify which transactions belong in the Purchases Journal
Only credit purchases of inventory/goods for resale (₦450,000) are entered in the Purchases Journal. The office furniture (₦120,000) is a fixed asset purchase on credit and belongs in the General Journal.
The Purchases Journal is strictly reserved for credit purchases of trading merchandise.

Key Concept

Purchases Journal Scope and Trade Discount Deduction
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Topics

Purchases Journal and Purchases Returns Journal

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