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Difficulty: Very hardPurchases Journal and Purchases Returns Journal

During May 2026, Ade Trading Enterprise engaged in the following transactions:

1. May 4: Purchased 100100 bags of rice for resale from Alhaji & Sons at ₦20,000\text{₦}20,000 per bag, subject to a 10%10\% trade discount.
2. May 10: Purchased office furniture on credit from Woodworks Ltd for ₦400,000\text{₦}400,000 less a 5%5\% trade discount.
3. May 15: Purchased 5050 cartons of milk for resale from Dairy Co. for ₦500,000\text{₦}500,000 cash.
4. May 22: Purchased 4040 bags of sugar for resale from Sweet Traders at ₦15,000\text{₦}15,000 per bag, subject to a 15%15\% trade discount with prompt payment cash discount terms of 2/10,n/302/10, \text{n}/30.
5. May 28: Returned 1010 defective bags of rice to Alhaji & Sons from the May 4 purchase.

What is the total amount (in ₦\text{₦}) to be entered into the Purchases Journal for May 2026?

Answer: 2310000 ₦

Answer

The total amount to be entered into the Purchases Journal for May 2026 is ₦2,310,000.
The Purchases Journal records only credit purchases of merchandise intended for resale, calculated after trade discounts. Summing the May 4 net purchase (₦1,800,000) and May 22 net purchase (₦510,000) gives a total of ₦2,310,000.

Step-by-Step Solution

1
Filter transactions for entry into the Purchases Journal
Only transactions on May 4 and May 22 qualify.
The Purchases Journal strictly records credit purchases of inventory/goods intended for resale. Fixed asset purchases on credit go to the General Journal, cash purchases go to the Cash Book, and returns go to the Purchases Returns Journal.
2
Calculate the net price for the May 4 transaction
₦1,800,000
Gross amount is 100×₦20,000=₦2,000,000100 \times \text{₦}20,000 = \text{₦}2,000,000. Deducting the 10%10\% trade discount (₦200,000\text{₦}200,000) gives ₦1,800,000\text{₦}1,800,000.
3
Calculate the net price for the May 22 transaction
₦510,000
Gross amount is 40×₦15,000=₦600,00040 \times \text{₦}15,000 = \text{₦}600,000. Deducting the 15%15\% trade discount (₦90,000\text{₦}90,000) gives ₦510,000\text{₦}510,000. Cash discounts are ignored when recording entries in the Purchases Journal.
4
Calculate the total Purchases Journal balance for the month
₦2,310,000
Sum the net amounts of eligible transactions: ₦1,800,000+₦510,000=₦2,310,000\text{₦}1,800,000 + \text{₦}510,000 = \text{₦}2,310,000.

Key Concept

Scope and calculation rules of the Purchases Journal
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Topics

Purchases Journal and Purchases Returns Journal

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