Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) Notes: The Purchases Ledger

  • A purchase is when good(s) are bought with intention of selling them later,
  • usually these goods will be sold at a profit
  • Items bought with the intention of using them in the business are known as assets
  • We have already looked at how to make entries in the Purchases Day Book and then transferring them into the Purchases Ledger here
  • This is the normal cycle: first a purchase transaction is recorded in the subsdiary book( book of original entry) i.e Purchases Journal/Purchases Day Book
  • Then into the appropriate ledger account in the Purchases Ledger
  • The Purchases Leger contains all the personal accounts of the creditors from whom we have bought goods on credit
  • Only credit purchases are recorded in the Purchases Ledger
  • The Purchases Ledger is also aptly known as the Creditor’s Ledger
  • Cash Purchases are not to be recorded in the Purchases Ledger

Purchases Ledger transaction and their entries

  1. When we purchase goods worth $x from M Mussa:
    1. Debit the Purchases Account with $x
    2. Credit M Mussa’s Account in the Purchases(Creditor’s Ledger) with $x
  2. When we settle our account and receive no Cash Discount:
    1. Debit M Mussa’s Account with the payment amount
    2. Credit Cash/Bank Account with payment amount
  3. When we settle our account and receive a Cash Discount:
    1. Debit M Mussa’s Account with the payment amount
    2. Debit M Mussa’s Account with the discount amount
    3. Credit Cash/Bank Account with the payment amount
    4. Record the discount amount beside in the discount column beside the payment amount in the Cash Book

To access more topics go to the Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) Notes.