What is a Purchases Journal?

A purchases journal is a subsidiary-level journal in which is stored information about purchasing transactions. This journal is most commonly found in a manual accounting system, where it is necessary to keep high-volume purchasing transactions from overwhelming the general ledger. All types of purchases made on credit are recorded in the purchases journal, including office supplies, services, and goods acquired for resale.

Characteristics of a Purchases Journal

The key characteristics of a purchases journal are as follows:

Records only credit purchases. A purchases journal captures credit transactions related to inventory, supplies, or other assets. Cash purchases are not recorded in the purchases journal, but instead in the cash payments journal.
Organized by supplier. A purchases journal includes the vendor’s name to track outstanding payments.
Helps in tracking accounts payable. Purchases recorded in the purchases journal increase accounts payable.
Used for general ledger posting. Instead of recording each transaction separately, totals from the purchases journal are posted periodically to the general ledger.
Provides records for financial reporting. A purchases journal provides a clear record of credit purchases, aiding in expense tracking and cost control.

A purchases journal is a crucial tool in accounting that helps businesses track credit purchases, manage accounts payable, and maintain accurate financial records.

Accounting for a Purchases Journal

Any transaction entered into the purchases journal involves a credit to the accounts payable account and a debit to the expense or asset account to which a purchase relates. For example, the debit relating to a purchase of office supplies would be to the supplies expense account. The journal also includes the recordation date, the name of the supplier being paid, a source document reference, and the invoice number. Optional additions to this basic set of information are the payment due date and authorizing purchase order number.

Periodically, and no later than the end of each reporting period, the information in the purchases journal is summarized and posted to the general ledger. This means that the purchases stated in the general ledger are only at the most aggregated level. If a person were researching the details of a purchase, it would be necessary to go back to the purchases journal to locate a reference to the source document. Auditors routinely engage in this activity when they are verifying transactions that have been posted to the general ledger.