Purchases journal

 Posted in: Special journals/subdivision of journal (explanations)

Definition and explanation

Purchases journal (also known as purchases
book and purchases day book) is a special journal used
by businesses to record all credit purchases. All cash
purchases are recorded in another special journal known as
cash payment journal or cash disbursements journal.
When merchandise and their invoice are received from
supplier, a responsible personnel from receiving
department compares them with the copy of the order
placed by the purchase department. If quantity and quality
of merchandise conform to the order, the merchandise are
accepted and transferred to the warehouse. After it, an entry
is immediately made in the purchases journal on the basis
of information obtained from the invoice provided by the
seller.
The invoice provided by the supplier (or seller) is known as
the purchase invoice or inward invoice. It usually provides
the following information:
1. The invoice number for the goods purchased.
2. The date on which the invoice is prepared.
3. The name, address, email, and phone number of both
buyer and seller.
4. A proper description of merchandise i.e., quantity,
quality, rates and total amount of the merchandise
purchased.
 5. The details about terms and conditions of sale.
Format/specimen of purchase invoice
A simple purchase invoice with basic information may look
like the following:

The actual format or look of the invoice issued by a seller

may be slightly different from the above specimen but basic
information provided therein is almost similar.
ADVERTISEMENT

Format of purchases journal

The number of columns used in purchases journal depends
on the needs of each business. The commonly used format
is given below
Explanation of columns:
 1. Date column: Date column is used to record the date
on which the invoice belonging to goods purchased is
received.
2. Supplier column: The supplier’s name is written in this
column. Some businesses also include a brief
description of goods purchased in this column.
3. Invoice date column: The invoice date column is used
to record the date on which the invoice is prepared by
the supplier.
4. Payment terms column: This column is used to
record the payment terms allowed by the supplier.
5. Reference column: At the end of each day, the entries
from purchases journal are posted to individual
accounts in the accounts payable subsidiary ledger. If
a computer software is used, these entries are
immediately posted to subsidiary ledger. Reference
column is used to record the account numbers of the
accounts to which the entries have been transferred. If
accounts are not numbered, the page number of
accounts is recorded in this column.
6. Accounts payable column: The amount payable on
the invoice is recorded in this column.
7. Items columns: These columns are used to enter the
cost of individual items purchased from suppliers such
as inventory, store supplies, office supplies and
equipment etc. The number of item columns to be used
on a purchases journal depends on the nature and
requirement of each individual business.
ADVERTISEMENT

Posting the purchases journal to subsidiary and

general ledger
Posting to accounts payable subsidiary ledger:
At the end of the day, each entry in the purchases journal is
posted to the credit side of the relevant individual account in
the accounts payable subsidiary ledger.
Posting to general ledger:
At the end of the month (or other appropriate period), the
column totals are posted to general ledger as follows:
1. The total of accounts payable column is credited to
accounts payable account in the general ledger.
2. The total of inventory column is posted to inventory
account in the general ledger.
3. The total of all other items are posted to their relevant
accounts in the general ledger.
Consider the following example for a better understanding of
the whole discussion.
Example
The following example summarizes the procedure of
entering transactions in the purchases journal and then
posting the entries to accounts payable subsidiary ledger
and general ledger accounts.