Paid On Account Journal Entries

Paid On Account Journal Entries refers to those Business Transactions that take place on credit or these do not involve cash paid or received immediately.

Such Journal Entries examples are shown below:

1. When Goods Purchased On Credit From Merchandising Company

In that case, the Journal Entry is to debit the Purchases Account and credit the Accounts Payable Account as shown below:

                                                        Purchases a/c  XXX

                                                                              Accounts Payable a/c  XXX

                                                              (Purchased Goods On Credit)

2. When Goods Sold On Credit To Customers

In this case, the Accounts Receivable Account is debited and Sales Account is credited as shown below:

                                    Accounts Receivable a/c  XXX

                                                                             Sales a/c  XXX

                                                              (Goods Sold On Credit)

3. When Liability is Created

When we take loans from banks or other financial institutions, then Cash Account is debited and loan account as a Liability is credited as shown below:

                                            Cash / Bank a/c   XXX

                                                                       Loan a/c   XXX

                                              (Loan is taken from Bank or Financial Institution)