PURCHASE LEDGER

~ Dean Bloom ~
~ BloomTech Solutions ~

PURCHASE LEDGER
Invoices
Credits
Issue Of  Payments
Allocations
Account Queries

Purchases are normally STOCK PURCHASES, or OTHER'S (OVERHEAD PURCHASES / EXPENSES).

For this example, we will assume purchases are OVERHEAD types, i.e. Electricity, Rent, Stationery, Fuel etc.

When a purchase invoice is recorded, it will effect the relevant OVERHEAD on the left hand side (DEBIT), and also the CREDITORS CONTROL ACCOUNT on the right hand side (CREDIT).

Both these Debit and Credit entries balance back to ZERO.  This is the term known as "Double Entry".

Having increased the Creditors Control Account by posting the invoice, when the invoice is then paid, the Creditors Control Account will then be decreased again. This time, the OVERHEAD ACCOUNT on the left will not be effected as you still want to show the total overheads in that period, but instead, the Bank Account on the left (DEBIT) will be decreased.

HERE IS AN EXAMPLE OF THE ABOVE.

Starting balances before the purchase takes place.

LETS SAY WE THEN POST AN INVOICE FOR £80.00 (TELEPHONE).
THE BALANCES WILL THEN BE:-  

THEN, WHEN THE INVOICE IS PAID, THE BALANCES WILL BE:-

As you can see, each time, the accounts still balance. This is because we must always use "Double Entry".

When a Credit Note is raised, usually due to returned goods or compensation etc., the opposite effect takes place.
   

SALES LEDGER
Invoices
Credits
Payments Received
Allocations
Credit Control
 

CASH BOOK
Entry of information
Accounting for VAT
Bank Statement Reconciliation
 

NOMINAL LEDGER
Double Entry
Trial Balance
 

VAT RETURNS
 

FIXED ASSETS
Depreciation
Net Book Value
 

PROFIT / LOSS