What is a Purchase Journal? Example, Journal Entries, and Explained


A purchase journal is a special journal that uses to record all of the transactions related to purchases on credit.

This special journal is prepared for reducing the large of transactions in the general journals. And it is normally prepared only if the entity has a lot of purchases on credit transactions.

If there is a small number of transactions of credit purchases, then the entity might record the purchase journal together with other transactions.

Purchases on credits are any purchase of products or services that the entity takes the products or users the services now and pays later. The accounting principle required the entity to record all of those transactions as liabilities.

Explanation and Example:

Entities might purchases goods or services and make the payments immediately to suppliers by cash.

In this case, an entity should not record these transactions in this journal. It should record in the cash payment transactions.

The entity uses a purchase journal only when it uses a manual to record accounting information. However, if an entity uses an accounting system to record its accounting and financial information, a purchase journal is not required.

The main information in the purchase journal includes the name of the entity, accounting period, date, suppliers’ accounts, invoices date, and payment terms.

The correspondence accounts that should be recorded included accounts payable, inventories, expenses, and other related accounts.

Recordings of these transactions should be following the debit and credit roles. For example, credit purchases should be an increase in credit as it is the liabilities. If those purchases are for inventories, then inventories accounts should be debited.

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All of the purchase on credit transactions are posted to this journal on an order-by date. And all you need to enter are the date, name of suppliers, supplies accounts, invoices identification, description of transactions, and amounts.

Sometimes, the entity also includes other information related to purchasing like fixed assets, inventories, or expenses.

Purchase journal Entries:

For example, this week, the entity purchased 10 computers amount USD 10,000 on credit from a local supplier.

In this case, the account involves these entries, including Fixed Assets (to record 10 computers) and Accounts payable.

Here is an example,

Debit Fixed assets amount USD 10,000

Credit Account Payable amount USD 10,000

(Memo: Purchase 10 computers on credit)

When the entity makes the payment for these 10 computers, then the accounting records will be as follow:

Debit account payable amount USD10,000

Credit cash/bank amount US10,000

(Memo: Payments to suppliers for USD10,000)