Purchases journal

Definition and explanation

Purchases journal is a special journal that is used to record the merchandise purchased on account. The entries in this journal are made on the basis of invoice received from the supplier at the time of purchase of merchandise. Other names used for the purchases journal are purchases book and purchases day book.

Format and recording procedure

The purchase journal has five columns as shown in the format below:

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(1) Date column is used to record the date of purchase of merchandise.

(2) Accounts credited column is used to record the name of business concern from whom merchandise are purchased on account.

(3) Invoice number column is used to record the invoice number for reference.

(4) Posting reference column is used to write the account number while posting into ledger. It indicates that posting has been made.

(5) Amount column is used to record the amount of invoice.

 Posting the purchases journal

The entries from purchases journal are posted to accounts payable subsidiary ledger and general ledger. The procedure is given below:

  1. The amounts from purchases journal are posted as credits to individual suppliers’ accounts in accounts payable subsidiary ledger. This posting is made immediately after an entry has been made in the purchases journal.
  2. At the end of each month (or as appropriate) the amount column of purchases journal is totaled and posted as debit to purchases account and credit to accounts payable account in general ledger.
  3. The sum of all postings to accounts in accounts payable subsidiary ledger is always equal to the amount posted to accounts payable account in general ledger.

Consider the following examples.

Example

The transactions completed by XYZ trading company for the month of January 2016 are listed below:

Jan. 02: Purchased merchandise on account from S & Co. for $900, invoice No. 105.
Jan. 06: Purchased merchandise on account from A & Co. for $3,200 , invoice No. 240.
Jan. 08: Purchased merchandise on account from Z Brothers for $360, invoice No. 115.
Jan. 15: Purchased merchandise on account from S & Co for $800, invoice No. 305.
Jan. 25: Purchased merchandise on account from S & Co for $700, invoice No. 395.
Jan. 31: Purchased merchandise on account from Z Brothers for $300, invoice No. 345.

Required:

  1. Record the above transactions in purchases journal.
  2. Post entries from purchases journal to accounts payable subsidiary ledger
  3. Post purchases journal to general ledger.
  4. Prepare the schedule of accounts payable.

Solution

(1). Purchases journal

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(2). Accounts payable subsidiary ledger

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(3). General ledger

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(4). Schedule of accounts payable

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