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Purchases Journal:

Contents:

Definition and Explanation of Purchase Journal:

When a businessman places an order for goods that he needs, the seller of the goods makes out an invoice. The top copy (first copy) of this invoice is received by the purchaser and is recorded in the purchases journal. There may be several of these invoices arriving every day, possibly as many hundred. They will all be the top copies of other selling firm's invoices and the purchase journal will be written on the basis of these invoices.

Ruling of Purchase Journal:

Purchase Journal

Date Description Invoice No. L/F Details $ Amount $

5.7.2005

ABC Stores
200Kg of tea @ $15/kg
Less trade discount

7540

CL1

3000
Nil


3,000
------------
3000

Explanation:

In fact there will be many invoices each day, filling several pages of the book by the end of the year. The one invoice shown and recorded is supposed to represent hundreds of invoices recorded within a year. The following points should be noted:

  1. The name of the supplier (ABC stores) is written or typed, next to the date. It is underlined.

  2. The details of the transaction are recorded in the next line down, giving a separate line to each item of goods supplied.

  3. Each invoice has a serial number which is written in the column, "invoice no."

  4. In the ledger folio (L.F.) column, the page number of the ledger where the account of the supplier has been opened, is written.

  5. The details column shows how net price of goods is determined after deducting trade discount (if allowed) and adding, packing expenses, cartage etc.

  6. The amount column shows the net price of the goods purchased.

Example:

Enter the following transactions into purchase journal:

  1. Jan. 10, 2005, purchased 400kg. of sugar from S & sons. @ $10 per Kg on credit.

  2. Jan. 15, 2005, purchased 200 liters of mustard oil from R & Co. @ $12 per liter.

  3. Jan. 23, 2005, purchased 100 kg. of soap from Lever Bros. @ $10 per kg.

Purchase Journal (Book) Folio (Page 12)

Date Description Invoice No. L/F Details $ Amount $

10.1.2005

S & sons.
400Kg of sugar @ $10/kg

--

CL-8

4000

4000
15.1.2005 R & Co..
200 liters mustard oil @ $12/liter

--

CL-10

2400

2400
23.1.2005 Lever Bros.
100Kg of soup @ $10/kg

--

CL-14

1000

1000
31.1.2005 Purchases account              Dr.   GL-16   7400

Ledger

S & sons A/C (Folio 8)

  10.1.2005
Purchases A/C    4,000

R & Co. (Folio 10)

  15.1.2005
Purchases A/C    2,400
 

Purchase A/C (Folio 16)

10.1.2005
Sundry creditors A/C 7,400
 

Lever Bros. A/C (Folio 14)

  23.1.2005
Purchases A/C    1,000

It must be noted that from purchases journal, posting is made in four different accounts, purchase account, S & sons account, R& co., and Lever brothers account. The purchase account is debited with the total amount of the three purchases totaling $7,400 (4,000 + 2,400 + 1,000) at the end of the month. S & sons account is credited with 4,000, R& co. is credited with 2,400 and Lever brothers account is credited with 1,000 (becoming creditors of the business).

Distinction Between Purchases Journal and Purchases Account:

  Purchases Journal   Purchases Account
1. It is a book of original entry - a special journal. 1. It is a book of final entry - a ledger account.
2. Each item of credit purchase of goods is recorded here separately in order of date as soon as the transactions take place. 2. Total of the purchase book (journal) is recorded at the end of the month.
3. All the details of goods purchased are written here. 3. No details are recorded, only the total amount of purchases during a particular period is recorded.
4. Cash purchased are not recorded. 4. Both cash purchases as well as credit purchases are recorded.
5. It is not required for the preparation of final accounts at the end of the year. 5. In final accounts, its balance is shown on the debit side of trading account.

Relevant Articles:

What is Subdivision of journal
Purchases Journal
Sales Journal
Purchases Returns Journal
Sales Returns Journal
Special Journal Quiz

 

 

 

 

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Financial Accounting Topics


  Introduction to Accounting
 ----------------------------------------------------------------------------
  Transactions and Accounting Equation
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  Analysis of Business Transactions
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  Journal, Ledger and Trial Balance
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  Accounting for Bills of Exchange
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  Special Journals
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  Cash Book
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Bank Reconciliation Statement
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  Final Accounts
----------------------------------------------------------------------------
  Work Sheet
----------------------------------------------------------------------------
  Capital and Revenue Items
----------------------------------------------------------------------------
  Valuation of Inventories
----------------------------------------------------------------------------
  Accounts of Non-profit Making Organizations
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  Statement of Cash Flows
----------------------------------------------------------------------------
  Accounting Ratios Analysis
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  Depreciation, Provisions and Reserves
----------------------------------------------------------------------------
  Accounting Dictionary
----------------------------------------------------------------------------
  Financial Calculators
 
 
 
Managerial Accounting Topics

  Financial Statements
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  Cost Volume Profit Relationship
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  Variable Costing System
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  Materials and Inventory Cost Control
----------------------------------------------------------------------------
  Activity Based Costing System
----------------------------------------------------------------------------
  Standard Costing and Variance Analysis
----------------------------------------------------------------------------
  Balanced Scorecard
----------------------------------------------------------------------------
  Capital Investment Analysis/Capital Budgeting
 
 

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