Posting Purchases on Account
Retail businesses purchase merchandise for resale. This is required, apart from other assets, to support essentials like supplies and equipment. The merchandise can be bought with cash or on account. The business posts these purchases on account in the accounts payable subsidiary ledger.
The Accounts Payable Subsidiary Ledger:
A business may purchase merchandise from different suppliers. Therefore, it is helpful to set up an accounts payable subsidiary ledger with an account for each supplier and creditor. These individual accounts are summarized in the general ledger controlling account as accounts payable. After posting, the following should match:
The Accounts Payable Subsidiary Ledger Form:
The ledger account is used for:
- Accounts payable subsidiary ledger
The ledger account form has the following details:
- Lines for the creditor’s name
- Lines for the address
- Three amount columns:
- Credit column: The normal balance of an accounts payable subsidiary account is entered here.
- Debit column: Payments made to creditors are entered here.
- Balance column: This column shows the amount owed to creditors.
- A manual accounting system arranges the accounts payable subsidiary ledger in alphabetical order with no account numbers.
- Computerized accounting assigns an account number to each creditor.
