Special Journals: Purchases and Cash Payments, Page 5

Using the Purchases Journal

The Purchases Journal is used to perform the following tasks: 

1. Recording the purchase of merchandise on account 
2. Journalizing the General Debit column (other purchases account) 
3. Posting entries from the Purchases Journal 
4. Posting from the General Debit column 
5. Totaling, proving, and ruling the Purchases Journal 
6. Posting the special column totals to the General Ledger

Recording the Purchase of Merchandise on Account:

Purchases are recorded in the Purchases Journal after the verification of an invoice is complete. Record the purchase of merchandise on account in the relevant columns by referring to the Purchases Journal.

Click the Play button to view an animation depicting the steps to record the purchase on account of a miscellaneous item other than a Merchandise purchase. 

 Journalizing the General Debit column (other purchases account):

At times, businesses may buy items that are not required on a regular basis. Because the Purchases Journal does not have a separate column for recording such items, they are recorded in the general debit column of the Purchases Journal. After journalizing the invoice, the accounting clerk places it in the tickler file.

Steps to Journalize the General Debit column: 

1. Enter the invoice date in the Date column. 
2. Enter the invoice number in the Invoice Number column.
3. Enter the creditor’s name in the Creditor’s Account column. 
4. Enter the total of the invoice in the Accounts Payable Credit column. 
5. Purchase Debit: Note: Store equipment is not merchandise purchased for resale. Therefore, this transaction is not recorded in the purchases debit column. 
6. Enter the total amount of the invoice in the General Debit column.

Click the Play button to view an animation depicting the steps to journalize the general debit column. 

Posting Entries from the Purchases Journal:

Each transaction in the Purchases Journal is a purchase on account transaction. Therefore, each transaction is separately posted to the Accounts Payable Subsidiary Ledger. The posting is done on a daily basis to keep the creditor’s account up-to-date.

Steps to Post to the Accounts Payable Subsidiary Ledger: 

1. Enter the date of the transaction in the Date column. 
2. Record the journal letter and the page number in the Posting Reference column. “P” is the letter used for the Purchases Journal. 
3. Enter the amount owed to the creditor in the Credit column.
4. Compute the new account balance by adding the amount in the Credit column to the Previous Balance account. 
5. Return to the Purchases Journal and place a check mark in the first posting reference column (next to the Creditor’s Account Credited column) in the Posting Reference (Purchase Journal) column.

Posting from the General Debit column:

The clerk makes daily postings from the General Debit column of the purchases journal to the appropriate accounts in the General Ledger.

Steps to Post from the General Debit column: 

1. Enter the date of the transaction in the Date column.
2. Enter the journal letter (P for purchases journal) and page number in the Posting Reference column. 
3. Enter the amount recorded in the General Debit column of the Purchases Journal. 
4. Calculate and record the new balance in the Debit Balance column. 
5. Return to the Purchases Journal and place the General Ledger Account number in the General Posting Reference column.

Totaling, Proving, and Ruling the Purchases Journal:

Totaling means adding the amounts in the Purchases Debit column, Accounts Payable Credit column and General Journal Debit column of the purchase journal.

Proving means testing the equality of debits and credits. You should add the Debit Purchases total with the General Debit total and compare the equality with the Accounts Payable Credit total.

Ruling means drawing a single rule and entering the date that the journal is being totaled.

Click the Play button to view an animation depicting the steps to complete a purchase journal.

The completed purchases journal is a quick reference tool for the accountant to review current transactions that affect the Purchases Account and Accounts Payable Account. Miscellaneous purchases are also reflected in the Purchases Journal.

Posting the Special Column Totals to the General Ledger:

After totaling and ruling the Purchases Journal, the totals of the Accounts Payable Credit column and the purchases debit column are posted to the general ledger accounts.

Steps to Post the Special Column Totals to the General Ledger:

1. Calculate the new balance for each account. 
2. Enter the new balance in the appropriate balance column. The figure shows the posting of these column totals. 
3. After posting each column total, write the General Ledger account numbers in parentheses, in the column below double rule as shown in figure. Note: The total of the General Debit column is not posted because the individual amounts were posted during the month. 
4. Place a check mark in parentheses below the double rule in the General Debit Column to indicate that the total is not posted.