Morning all
This question concerns the Purchase Returns Account (in double entry accounting).
I think I understand how it operates and the circumstances under which one is created. However, I don't see why it's not redundant.
Suppose I (the business) purchase something that contributes to expenses but then I return it and receive a refund. Why would I not just debit Accounts Payable (or Cash) and credit the relevant Expenses account instead of using Purchase Returns?
This seems particularly relevant if I am also categorising my expenses (i.e. I have several expenses accounts for different categories like "office equipment", "travel" etc.). Crediting the *relevant* Expenses account (instead of using Purchase Returns) means I still get an accurate net total in each Expenses account at the end of the period, whereas using Purchase Returns, I'd just end up with one total for returns without the information about how each Expense category is affected (unless I create a Purchase Returns account for each Expense account which would mean even more redundancy).
Insight much appreciated
Benjamin
This question concerns the Purchase Returns Account (in double entry accounting).
I think I understand how it operates and the circumstances under which one is created. However, I don't see why it's not redundant.
Suppose I (the business) purchase something that contributes to expenses but then I return it and receive a refund. Why would I not just debit Accounts Payable (or Cash) and credit the relevant Expenses account instead of using Purchase Returns?
This seems particularly relevant if I am also categorising my expenses (i.e. I have several expenses accounts for different categories like "office equipment", "travel" etc.). Crediting the *relevant* Expenses account (instead of using Purchase Returns) means I still get an accurate net total in each Expenses account at the end of the period, whereas using Purchase Returns, I'd just end up with one total for returns without the information about how each Expense category is affected (unless I create a Purchase Returns account for each Expense account which would mean even more redundancy).
Insight much appreciated
Benjamin