ZIMSEC O Level Principles of Accounts Notes: Purchases Control Accounts
- Purchases Control Accounts contain a summary view of the purchases ledger
- Below is a typical purchases control account:
| Purchases Ledger | ||||||
| Date | Details | Amount($) | Date | Details | Amount($) | |
| 31 Dec | Cash/Bank | xxx | 1 Jan | Balance b/d | xxx | |
| 31 Dec | Discount Received | xx | 31 Dec | Purchases | xxx | |
| 31 Dec | Returns Outwards | xx | 31 Dec | Balance c/d | xxxxx | |
| 31 Dec | Set Off | xx | ||||
xxxxx | xxxxx |
- Naturally the exact entries depend on transactions that occur in the business in the period under review or the question in an exam
Sources of information when preparing
| Purchases Control | Source |
|---|---|
| Opening creditors | List of creditors’ balances drawn up at the end of the previous period |
| Purchases for the period | Total from Purchases Day Book/Purchases Journal |
| Purchases Returns | Total of Returns Outwards Day Book |
| Cheques Paid/Bank Payments | Cash Book: bank column on payments side/ Bank Statement etc |
| Cash Paid | Cash Book: cash column on payments side |
| Discount Received | Total of discounts received column in the Cash Book |
| Closing creditor's balance | List of creditors’ balances drawn up at the end of the period |
NB
- It is possible that some of our creditors are also our debtors
- These creditors may agree with the business to write off outstanding balances
- For example we bought goods worth $1000 from J Moyo during the year
- This is shown in J Moyo’s purchases account in the Purchases Ledger
- We also sold goods worth $300 during the year to the same J Moyo
- This is shown as a sale in J Moyo’s Account in the Sales Ledger
- Instead of the business paying J Moyo $1000 and receiving $300 we can just pay the difference $700
- A Contra entry/Set Off is used to show that part of the debt has been written/knocked off
- Contrasting entries will be shown in the Purchases Control Account (Debit Side) and Sales Control Account (Credit)
- These are often described as Contra (short for contrasting) entries/ Set Off entries
- Also the Purchases Control Account should not be confused with the Purchases Account
- The two have opposite balances, the Purchases account records total purchases for the period and has a debit balance
- The Purchases control account is a summarized version of transactions relating to credit purchases
To access more topics go to the Principles of Accounting Notes.
