What is a Purchases Journal?

Purchases Journal

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Purchases Journal

A Purchases Journal, also known as a Purchases Day Book, is a specialized accounting journal that records all of a business’s credit purchases during a specific period. It is used in manual accounting systems to simplify the bookkeeping process and is part of the larger double-entry accounting method.

The Purchases Journal is used only for recording transactions related to the purchase of goods on credit for the business. It does not include cash purchases or the purchase of assets or services.

Each entry in the Purchases Journal typically includes the date of the transaction, the name of the supplier, the invoice number, a brief description of the items purchased, and the amount of the transaction.

At the end of a specific period (daily, weekly, or monthly), the total purchases recorded in the Purchases Journal are summed up and posted as a single entry to the general ledger, reducing the number of individual entries that would otherwise be required.

By recording all credit purchases in one place, a Purchases Journal allows a business to easily monitor its purchasing activity, manage its accounts payable more effectively, and simplify the auditing process.

Example of a Purchases Journal

Let’s say we have a small clothing business named “Fancy Threads”. They make various purchases on credit throughout the month of May. Here’s what their Purchases Journal could look like:

DateSupplierInvoice NumberDescriptionAmount ($)
May 1Cotton Mill2215Cotton fabric3,500
May 5Trimmings Inc.3368Zippers and buttons1,000
May 10Dye Masters4427Fabric dye2,000
May 15Cotton Mill2218More cotton fabric3,500
May 20Stitching Supplies1255Sewing threads500
May 25Cotton Mill2221Even more cotton fabric3,500

At the end of the month, the total amount of credit purchases would be added up:

$3,500 (Cotton Mill) + $1,000 (Trimmings Inc.) + $2,000 (Dye Masters) + $3,500 (Cotton Mill) + $500 (Stitching Supplies) + $3,500 (Cotton Mill) = $14,000

This total would then be used to make an entry in the general ledger:

  • Debit (increase) Purchases Account: $14,000
  • Credit (increase) Accounts Payable: $14,000

This shows that “Fancy Threads” increased its inventory by $14,000 and also has an obligation to pay $14,000 to its suppliers. This is a simplified example. In a real-world scenario, the Purchases Journal could have many more entries, and there might also be additional columns for things like purchase order numbers, payment terms, etc.

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