We would use some generic column title such as “other” to represent those cash transactions in the subsidiary ledger though the specific accounts would actually be identified by account number in the special journal. We would look up the account number for Utility Expense and credit the account for the amount of the check. If we received a refund from the electric company on January 28 in the amount of $100, we would find the account number for utility expense (say it is 615) and record it. During the normal course of business, many companies will purchase items on credit. When items are purchased on credit or on account, the transaction is recorded in the accounting records in the purchases journal.
This special journal is prepared for reducing the large of transactions in the general journals. And it is normally prepared only if the entity has a lot of purchases on credit transactions. A credit to relevant supplier’s account in payables ledger accompanies each purchase entry in purchase journal. Purchases accounts or inventory accounts in case of perpetual inventory system are debited with total of purchases journal usually at the end of each month.
Purchases Journal Format, Calculation, and Example
Since the purchases journal only records credit transactions, none of the cash transactions made during the period are posted in it. Instead, all cash inventory and supply purchases are recorded in the cash disbursements journal. A typical purchases journal has several columns to record the date, vendor account, invoice date, credit terms, accounts payable balance, and other account balances. All of these columns use source documents that were acquired throughout the voucher system. The purchasing journal would also record the transaction by debiting inventory, crediting accounts payable and recording the date, invoice, terms, and vendor.
You have accounts with many of your suppliers and decide to order additional stock before the spring months arrive and the demand for wood increases. Usually, debits have a left alignment in the purchases journal entry field while credits are indented or aligned with the right side of the line. This is an easy method for quickly identifying which transactions are deposits, and which ones are withdrawals.
General Journal
Sometimes, the entity also includes other information related to purchasing like fixed assets, inventories, or expenses. Tickets can be purchased in person at gas stations, convenience stores and grocery stores. Winning lottery numbers are sponsored by Jackpocket, the official digital lottery courier of the USA TODAY network. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike License . Prepare the purchase subsidiary book of Unreal Pvt Ltd. from the following details.
Any accounts used in the Other Accounts column must be entered separately in the general ledger to the appropriate account. Figure 7.25 shows how the refund would be posted to the utilities expense account in the general ledger. The correspondence accounts that should be recorded included accounts payable, inventories, expenses, and other related accounts.
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