If you run a shop, two kinds of money go out every day: the stock you buy to sell (purchases) and the running costs of the shop like rent and electricity (expenses). Learning to record purchases and expenses for a small shop keeps your stock count, your supplier dues and your real profit correct — and leaves you ready if GST records are ever asked for. This guide explains the difference, how to record each cleanly, when you can claim input tax credit, and which reports tie it all together.
Purchases vs expenses — the difference that matters
They feel similar (money leaving the till), but they behave differently in your books, so keep them apart:
| Purchase | Expense | |
|---|---|---|
| What it is | Stock you buy to resell | A cost of running the shop |
| Examples | Rice bags, paper reams, phone stock | Rent, electricity, salaries, repairs |
| Touches stock? | Yes — item quantity goes up | No |
| Creates a supplier due? | Yes — a payable you settle later | Usually paid on the spot |
| Recorded in Yojika as | A purchase bill (Purchases screen) | An expense (Expenses screen) |
Getting this split right is what lets you answer “what did I actually earn?” — profit is sales minus the cost of goods minus running costs.
How to record a purchase bill
A purchase bill is the paper bill your supplier gives you. Recording it does two useful things at once: it stocks up the items and it tracks how much you still owe that supplier.
- Open the Purchases screen and click New purchase.
- Pick the vendor (your supplier). Not saved yet? Create them from the picker.
- Enter the supplier bill number and bill date — the number printed on the paper bill. Yojika also gives the bill its own internal number so you can always find it.
- Add each item as a line: choose the item, the quantity, and the rate.
- Choose Incl. GST or Excl. GST depending on how the supplier quoted the rate.
- Check the totals and Save.
Yojika splits the tax automatically — CGST + SGST when the supplier is in your own state, or IGST when they are in another — based on the vendor’s GSTIN. Saving the bill increases the stock of every item on it; if you send goods back, raise a debit note and it reduces what you owe. Purchases live in their own list and never mix with your sales invoices, so the totals strip answers one clean question: how much do I still owe my suppliers?
How to record a shop expense
Expenses are the costs that keep the shutter open. Yojika starts you with a set of common Indian-shop categories — Rent, Electricity, Salaries, Transport, Tea & snacks, Repairs and Other — and you can add your own.
- Open the Expenses screen and click New expense.
- Pick a Category (add more with Categories if the list is short).
- Enter the Amount and the Date.
- Choose how you paid — Cash, UPI, Card, Bank, Cheque or Other.
- Add Notes if it helps you remember, then save.
The screen shows a total for the date range you pick and a chip for each category, so you can see at a glance that (say) electricity is creeping up.
Claiming input tax credit (ITC) on an expense
If an expense carries GST you are entitled to claim back, turn on Claim Input Tax Credit (ITC). Yojika then treats the amount as GST-inclusive, lets you pick the rate, and shows the split — the taxable value and the GST sitting inside your amount — which then feeds your GST reports.
Be careful here: ITC is only for genuine business costs backed by a valid tax invoice, and the law blocks it on some things (food and beverages, for example). There is also a deadline to claim it. Whether a particular expense qualifies is a call for your accountant — flag it in Yojika, but confirm the current ITC rules on cbic.gov.in or with your CA before relying on the credit.
Money coming in that isn’t a sale
Interest, rent you receive, or a small commission aren’t sales — record them under Other income. It works like Expenses but has no GST section: it’s simply a plain record of money in.
A worked example — Anjali’s stationery shop, Nagpur
Anjali runs a stationery shop in Nagpur, Maharashtra. Here’s a normal day in her books. Everyone she deals with is in Maharashtra, so every tax splits into CGST + SGST (an intra-state sale).
A purchase from her wholesaler, Vidarbha Paper Mart (Nagpur):
- 20 reams of A4 paper at ₹250 = ₹5,000 taxable value.
- GST at 18% (illustrative — confirm the rate for your goods) → CGST 9% = ₹450 and SGST 9% = ₹450.
- Bill total = ₹5,000 + ₹450 + ₹450 = ₹5,900.
Recording it adds 20 reams to her paper stock and shows ₹5,900 owed to Vidarbha Paper Mart until she pays.
Her expenses that month:
- Shop Rent — ₹8,000 (plain expense, no ITC).
- Electricity — ₹1,500 (plain expense, no ITC).
- Printer Repair by a GST-registered technician — ₹1,180, paid in full. She turns on Claim ITC at 18%, and Yojika shows the ₹1,180 as ₹1,000 taxable + ₹180 GST (CGST ₹90 + SGST ₹90).
Her Expenses screen total for the month reads ₹10,680 (₹8,000 + ₹1,500 + ₹1,180 — the full amount she paid, ITC included). A ₹500 commission she earned goes under Other income. Every figure ties back to a document, which is exactly what you want if records are ever reviewed.
The reports that pull it together
Once purchases and expenses are in, the numbers turn into answers:
- Day book — every transaction for a day, in and out, in one list.
- Purchase register — all supplier bills, filterable by date and vendor.
- Expense report — spending by category and period.
- Profit reports and a simple P&L — sales minus cost of goods minus running costs, so you see what the shop truly made.
Every report exports to CSV, PDF or Excel for your accountant.
Why bother recording every one?
Beyond knowing your own numbers, GST law expects a registered shop to keep proper accounts. Under CGST Section 35 read with Rule 56, a registered person keeps true accounts of inward supplies (your purchases), stock, and the related bills and notes (see the rules on cbic.gov.in). Recording each purchase bill and expense as it happens is the least painful way to meet that — and to keep the input tax credit trail ready. Rules and thresholds change, so confirm what applies to your shop on gst.gov.in or with your CA.
Doing this the easy way with Yojika
Yojika is offline-first GST billing software built for Indian small shops. Purchases stock up your items and post to the vendor ledger; expenses sort into categories with an optional ITC split; and the reports turn all of it into a clear picture of profit — all on your own PC, no cloud required.
- See what’s included on the features page.
- Check simple, transparent pricing on the pricing page.
- Or download Yojika and try it free for 14 days.
Keep going: learn how to manage your shop inventory, read your daily sales report, and track dues with digital udhaar khata.
This article is general information, not tax advice. GST rules and thresholds change — confirm the current position on gst.gov.in or with your CA.