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Purchases & expenses
Recording what you buy keeps your expenses accurate, increases your stock, and captures the GST you can claim back (input tax credit). Small running costs go in as expenses; supplier goods go in as purchase bills.
Read this first
- ▸ A purchase bill captures your payable, the expense/stock, and your input tax credit — in one entry.
- ▸ Day-to-day costs (fuel, rent, courier) go in as Expenses, neatly categorised.
- ▸ Purchase Orders and GRN (goods receipt) keep buying organised on Pragati and above.
Being straight with you
- • Your input tax credit only counts when each purchase bill is recorded with the supplier's GSTIN and correct GST — so enter them promptly.
- • Purchase Orders and Goods Receipt Notes are Pragati+; basic purchase bills and expenses are available on the free plan.
Step by step
- 1
Record a purchase bill
Purchases → New BillChoose the supplier, enter the bill number and date, and add the items and amounts from the bill.
- 2
Add expenses
Purchases → ExpensesLog running costs and tag a category (rent, transport, salaries) so they flow into your P&L correctly.
- 3
Use POs & GRN (optional)
Raise a Purchase Order to fix price and quantity, then record a GRN when goods arrive to verify the delivery.
Purchase bill or expense — which one?
Two things you buy, two ways to record them. Getting this right keeps your stock and your ITC accurate.
| Purchase Bill | Expense | |
|---|---|---|
| Use for | Goods bought from a supplier | Running costs (rent, fuel, courier) |
| Affects stock? | Yes — increases inventory | No |
| Captures ITC? | Yes (with supplier GSTIN) | Sometimes |
| Example | Buying 500 units to resell | Office electricity bill |
Recording a purchase bill (what happens behind it)
When you record a supplier's bill, MGH Books does three things in one entry, so you don't post them separately:
- Adds what you owe the supplier (your payable).
- Increases your stock (for goods) or records the expense.
- Captures the GST you paid as Input Tax Credit you can claim.
Expenses and categories
Day-to-day costs go in as Expenses. Tag each one to a category — rent, transport, salaries, marketing — so it flows into your Profit & Loss under the right head and you can see where money actually goes.
Purchase Orders & GRN (Pragati and up)
For more organised buying, use Purchase Orders and Goods Receipt Notes. A PO fixes the price and quantity with your supplier in writing; a GRN records exactly what arrived against that PO.
Together they give you a ‘three-way match’ — order, receipt and bill all agree — so short or wrong deliveries and over-billing get caught instead of slipping through.
| Step | Document | What it does |
|---|---|---|
| 1 | Purchase Order | Locks agreed price & quantity |
| 2 | GRN | Records goods actually received |
| 3 | Purchase Bill | Matched to PO & GRN, then paid |
Protecting your Input Tax Credit
ITC is real money off your GST bill, but only if it's recorded correctly. The habit is simple: enter every purchase bill promptly, with the supplier's GSTIN and the right GST, then reconcile against GSTR-2B each month.
Paying suppliers & tracking payables
Record payments against purchase bills so your payables stay accurate. At any time you can see exactly what you owe and to whom — the mirror image of your customer receivables.
Troubleshooting
My ITC looks low
Fix: Make sure every purchase bill is entered with the supplier's GSTIN and correct GST — ITC only counts when these are recorded — then reconcile against GSTR-2B.
A supplier bill doesn't match the PO
Fix: Use the GRN to confirm what arrived; if quantity or price differs, raise it with the supplier before paying.
I recorded an expense as a bill (or vice-versa)
Fix: Goods that affect stock should be Purchase Bills; running costs should be Expenses. Edit the entry to the correct type.
A purchase looks duplicated
Fix: Check the supplier's bill number — MGH Books flags repeats, so a duplicate usually means a slightly different number was entered twice.
Words you’ll see (in plain English)
- ITC
- Input Tax Credit — GST you paid on purchases, set off against GST you collect.
- Payable
- Money you owe a supplier.
- Purchase Order (PO)
- A document fixing agreed price and quantity before goods arrive.
- GRN
- Goods Receipt Note — records what physically arrived against a PO.
- Three-way match
- Order, receipt and bill all agreeing — catches short/over deliveries.
- RCM
- Reverse Charge — where you (the buyer) pay the GST, e.g. on imports/OIDAR.
Ready to try it?
Open PurchasesNext steps