Before we go further, we have to understand that what is purchase accounts. When goods are purchased by business to be sold are known as purchase and in accounting we have to write purchase as purchase accounts.
Purchase account is nominal accounts by nature means it’s an expense for the business .Therefore when goods are purchased, they are debited as per rule of nominal accounts we have debit all expenses and losses. Purchase account is expense for the firm.
Example . Mohan stationary purchase 100 box of pen for his shop in this case we have prepare Purchase accounts because Mohan purchase these boxes of pens to be sold .Note Purchase account can be considered as real account as we can feel and touch goods purchased .
Journal entry of purchase by cash.
When goods are purchased by cash under such condition, we have to open two accounts Purchase and Cash.
Example. Mohan Purchased 100 box of pens for Rs 10,000 for cash .
Accounts to be opened are Purchase A/c and Cash A/c and journal entry for the same will be .
Purchase A/c Dr. | 10,000 |
To Cash A/c | 10,000 |
(being goods purchase for cash | |
Note: Purchase Accounts is nominal account and debit all expense and losses as purchase is expense.
Cash is Real accounts as per Real account credit what goes our and in this entry cash goes out of businessr.
Journal entry of purchase by Cheque.
It’s a business practice to purchase goods by cheque during course of business.
When goods are purchased by Cheque under such condition, we have to open two accounts Purchase and Bank. (cheque are deposited and withdrawal from bank) as cheque effects our bank accounts.
Example. Mohan Purchased 100 box of pens for Rs 10,000 for Cheque .
Accounts to be opened are Purchase A/c and Bank A/c and journal entry for the same will be .
Purchase A/c Dr. | 10,000 |
To Bank A/c | 10,000 |
(being goods purchase for Cheque no 1256 | |
Note: Purchase Accounts is nominal account and debit all expense and losses as purchase is expense.
Bank is personal accounts as per personal account credit the giver and in this entry bank is the giver.
Journal entry of purchase On credit.
Goods purchased journal entry
It’s a business practice to purchase goods on credit during the course of business.
When goods are purchased on credit under such conditions, we have to open two accounts Purchase and the name of the party from whom goods are purchased.
Example. Mohan Purchased 100 boxes of pens for Rs 10,000 from Suresh.
Accounts to be opened are Purchase A/c and Suresh and journal entries for the same will be.
Note: Accounts is not used after the name
Purchase A/c Dr. | 10,000 |
To Suresh. | 10,000 |
(being goods purchase for Cheque no 1256 | |
Journal entry of purchase return in books of accounts .
journal entry of purchase return
Sometimes goods purchased from the party return to the party because of many reasons such as goods not in good conditions, Goods supplied not as per specification, Goods given are out o date or many such reasons under such conditions goods are returned to the party.
Under this process, a debit note is to be issued by the party to its supplier and make a journal entry of purchase return.
Example. Return goods to Suresh Rs 2000.
Accounts to be opened are Purchase Return A/c and Suresh and journal entry for the same will be .
Suresh Dr. | 2,000 |
To Purchase return A/c | 10,000 |
(being goods purchase for Cheque no 1256 | |
Note : Suresh Account is debited as Suresh is personal accounts as per personal account Debit the receiver and here Suresh is the receiver.
Purchase return is credited because we take purchase return as Real Accounts Cr. What goes out and goods are going away in this entry or if we treat Purchase returns as Nominal accounts, we are reversing our expense entry of purchase here.
Special Entry of Purchase
When goods goods are given away as charity and loss by fire or taken by employee under such condition we have to credit purchase account and the other account in the books of accounts.
Goods given away as charity Rs 4000.
Charity A/c Dr. | 4,000 |
To Purchase A/c | 4,000 |
(being goods purchase for Cheque no 1256 | |
Goods taken by the proprietor for his personal use Rs 4000
Drawing A/c Dr. | 4,000 |
To Purchase A/c | 4,000 |
(being goods purchase for Cheque no 1256 | |
Goods loss by fire Rs Rs 6000.
Loss by fire A/c Dr. | 6,000 |
To Purchase A/c | 6,000 |
(being goods purchase for Cheque no 1256 | |
In all these entry the goods are going out of business but we are not selling them as we are reducing our purchase in the business therefore purchase accounts is credited in the books of accounts.
Ledger of purchase Accounts
Purchase ledger is the ledger in which all the accounting transactions related to the purchase of goods or services by the company during a period of time is recorded, showing the lists of the purchases along with the amount which the company has paid to its supplier or the amount due to the supplier.
Date | Particular | Amount | Date | Particular | Amount |
1-4-2021 | To cash | 10000 | By drawing A/c | 2000 | |
11-4-21 | To Mohan | 12000 | By loss by fire A/c | 1000 | |
By advertisement a/c | 2000 | ||||
By trading a/c | 17,000 | ||||
22000 | 22000 |
Balance of ledger is transfer to trading account in this case it is Rs. 17,000