What is a purchase credit journal entry?
An acquisitions credit periodical entry is made in the purchasing journal on the date that a business acquires goods or amenities.
The commercial will debit the procurements allocated account in the Procurements journal and 80ee income tax
Registering a Credit Purchase in the Journal
When a company buys products the company debits the purchasing account, which increases the company’s assets.
The company will also credit its accounts payable account, increasing the company’s obligations.
The following journal entry would result from this transaction.
| Date | Account Name | Debit | Credit |
| xx/xx/XXXX | Purchases | $xx | |
| Accounts Payable | $xx
|
||
On xx/xx/XXXX, the company bought $xx worth of bicycle tires on credit.
The accounts allocated account will be withdrew attributed when the company pays the vendor for the purchase.
This transaction’s journal entry is as follows.
| Date | Account Name | Debit | Credit |
| xx/xx/XXXX | Accounts Payable | $xx | |
| Cash | $xx
|
Purchase Credit Journal Entry Example
Let’s act there’s a business that makes and sells electric bicycles.
On November 10th, 2021, this corporation acquires $5,000 worth of tires on credit from a dealer.
This transaction will need to be recorded by the electric tandem company.
Entry of Purchase Credit Journal
On November 10th, 2021, the electric bicycle firm debited the purchasing when it purchased bicycle tires from a vendor.
On November 30th, 2021, the electrical bicycle corporation paid $5,000 to the tire manufacturer.
The electric cycle company then deducted $5,000 from its accounts payable account and credited $5,000 to its cash account.
The following are the periodical entrances for the tire purchase and payment:
Purchase Credit Journal Entry
| Date | Account Name | Debit | Credit |
| 11/10/2021 | Purchases | $5,000 | |
| Accounts Payable | $5,000
|
On November 30, 2021, the electric bicycle business paid $5,000 to the tire manufacturer.
The electric bicycle company then deducted $5,000 from its accounts payable account and credited $5,000 to its cash account.
The following are the diary entries for the tire purchase and payment.
Payment Credit Journal Entry
| Date | Account Name | Debit | Credit
|
| 11/30/2021 | Accounts Payable | $5,000 | |
| Cash | $5,000
|
On November 30, 2021, an individual paid $5,000 for the bicycle tires acquired on November 10, 2021, for credit purchase journal entry
Advantages and Drawbacks of Credit Journal
Advantages of Purchase Credit Journal Entry
- When products or services are acquired on credit, keeping track of the transaction helps the firm keep track of their credit transactions.
- Keeping track of these procurements allows a company to quickly determine a purchase by looking up the contract by date and vendor.
Limits on Purchase Credit Journal Entry
- People make mistakes when they record purchase credit diary entries. As a result, there is always the risk of making a mistake. If there is an error, the incorrect transaction is recorded in the purchasing journal.
- The likelihood of an error in a large company with many transactions rises dramatically.
