Journal Entry for Purchase on Cash

Journal Entry for Purchase on Cash

Journal entry for purchase in cash shall be recorded by debiting the purchase account and crediting the cash account. The purchase is debited being increase in expense and cash is credited being decrease in asset.

Date	Particular	Ledger Folio	Dr.	Cr.
	Purchase		xxx
	Cash.			xxx

Journal entry for Purchase on Cash in Periodic Inventory System

In periodic inventory system the purchases is immediately charged as expenses regardless of its sale and at the end of period (Financial year) the stock is counted and unsold items are accounted for as stock. Thus the following journal entries are recorded in book of accounts.

First Journal entry at the time of purchases made shall be recorded by debiting the purchase account being increase in expense and crediting the cash account being decrease in asset.

Date	Particular	Ledger Folio	Dr.	Cr.
	Purchase		xxx
	Cash.			xxx

Second entry at the year end; the stock is debited being increase in stock and income account is credited (because increase in stock will increase your profit, technically increase in stock is reduction of your already charged purchases expenses).

Date	Particular	Ledger Folio	Dr.	Cr.
	Stock		xxx
	P&L			xxx

 

Journal entry for Purchase on Cash in Perpetual Inventory System

In perpetual inventory system, the purchase is treated as stock at the time of purchase and once these items are sold, and then expense is recorded. Thus the following scheme of journal entries is recorded.

In first place the purchase are debited being increase in stock and cash is credit being decrease in asset. The term purchase inventory is being used to improve understanding , otherwise inventory account is a suitable heading.

Date	Particular	Ledger Folio	Dr.	Cr.
	Purchase Inventory		xxx
	Cash.			xxx

When inventory items are sold, then the following journal entry is recorded, the expense is charged to cost of goods account by debiting the Cost of Goods Sold account (CGS) account and stock is reduced by crediting the purchases inventory.

Date	Particular	Ledger Folio	Dr.	Cr.
01-01-2017	Cost of Sales		xxx
01-01-2017	Purchase inventory			xxx