Purchases journal is a special journal used to record purchases made on credit. Businesses usually purchase items on credit so frequently that recording those in general journal will overcrowd it. It is best to maintain a specialized purchases journal for such transactions. Purchases journal and other specialized accounting journals help keep the data organized and easy to search for information needed. Purchases for cash may also be frequent but those are recorded in cash payments journal instead of purchases journal.
Like sales journal, purchases journal is also just a list of purchases made. It is unnecessary to record the credit side of the transaction involving purchases made on account. Each row on purchase journal represent a separate purchase with various columns providing relevant data. A credit to accounts payable is implied.
Purchases journal is laid out in the form of a table having the following columns:
- Order Number
- Supplier Name
- Reference (to supplier’s account in payables ledger)
- Amount on Invoice
Information such as description of goods or services received, quantity of goods purchased and credit terms are usually on the face of invoice but may be recorded in purchases journal as well. Depending on a company’s needs, purchases journal may also record additional information, for example, if goods or services purchased are charged at varying sales tax rates and the tax paid thereon is recoverable from tax authorities, such information may also beneficial if recorded on purchases journal.
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.
The following example shows a typical purchase journal format.
|Date||Order No.||Supplier||Reference||Amount USD|
|20X5-07-01||48954||Bilal Sound Machines LLC||275||765|
|20X5-07-01||48955||Designed by Emily LLC||364||500|
|20X5-07-01||48956||Michael De S||495||750|
|20X5-07-01||48957||Julia Lunar Travels LLC||299||1,900|
Written by Irfanullah Jan and last revised on