A Special Journal Used For Recording All Items Or Goods (Merchandises) Purchased On Account
A Special Journal Used For Recording All Merchandises Purchased On Account / Used To Record Purchase Of Merchandise On Account
Example: Mr. A is a sole owner of his business. On 5th August, 2021, Mr. A Purchased Items Worth Rs. 30000 from Mr. B on account.
This is a transaction and should be recorded in Purchases Special Journal.
The journal entry to record is shown below:
Purchases a/c 30000
Mr. B 30000
(Items Worth Rs. 30000 Purchased On Account)
Purchases, as a direct expense, is debited as it is increasing and the amount payable by the business to Mr. B, who is a supplier or vendor, is also increasing, so it is recorded as a current liability and should be credited.
The Effect Of Purchasing Items On Account On The Accounting Equation
Assets = Liabilities + Owner’s Equity
0 = +Mr. B + (-Purchases)
0 = +30000 + (-30000)
When purchases is created, it decreases owner’s equity as it is a direct expense. So, the purchases account is deducted from owner’s equity on the right side of the accounting equation as it is the result of the profitable or operating activities of the owner (Mr. A) of the business.
As the business is liable to pay to Mr. B, who is the supplier or vendor, to whom the business purchased items on account or on credit. So Accounts Payable / Sundry Creditor (Mr. B) as a current liability increases for the business and hence, as a result it is added to the liabilities on the right side of the accounting equation. After this transaction, still the accounting equation is remained in balance.
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