Purchase Journal : Definition with Example

In this free online accounting training lecture on purchase journal, you will learn:

  • What is Purchase Journal
  • Definition of Purchase Journal
  • Sample or Example of Purchase Journal
  • Entries of Purchase Journal
  • Recording Procedure of Purchase Journal

If you are wondering what is purchase journal then here is the definition. Purchase journal can be defined as a special journal where all credit purchase entries are recorded in chronological order.

As you know, after selling merchandise there is another transaction which is frequently occurring in the business that is the purchase of merchandise or product. The purchase of any product could be for business purpose or for resale, either for cash or on credit. The purchases on cash are recorded in a cash payments journal. And the purchases which are on credit that are recorded in a purchases journal in a chronological manner.

The purchases journal contains a column named with Accounts Payable Cr. This purchases journal is basically exercised for recording credit purchases of inventory only. The credit purchases of any equipment, supplies, other such items, and purchase returns would be recorded in the general journal but it also could have special columns for if there are other frequently occurring transactions, for example, purchases discount or purchases return. During a particular accounting period, the individual entries are posted to accounts in the accounts payable subsidiary ledger. At the end of the accounting period, the total amount is posted to both Accounts Payable and Purchases.

The procedures for recording entries in the purchases journal and sales journals are quite similar. But the sales journal contains invoice numbers and the purchases journal contains invoice dates. The invoice date of purchases journal is helpful for recognizing the beginning time of a discount period. In the accounts payable subsidiary ledger each purchase is generally posted to the account of individual creditor. The source of the entries that are posted to the subsidiary and general ledgers will be specified in the Posting Reference column of each account by inserting the letter P for purchases journal and the page number of the purchases journal. After the posting of individual credit to a creditor’s account in the accounts payable subsidiary ledger, a check mark (_) is added to the Posting Reference column of the purchases journal. At regular periodic intervals, the amounts in the Other Accounts Dr. Column are posted to the accounts in the general ledger. When each amount is posted, then the related account number of general ledger will be inserted in the Posting Reference column of the Other Accounts section. At the end of each particular month, the amount columns of the purchases journal will be totaled.

As the sales journal does, the purchases journal is also cross-referenced to the general and subsidiary ledgers. The collective total amount of all balances in the accounts payable subsidiary ledger must equals the balance in the accounts payable account.

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