A business records all its credit purchases in its purchase journal (purchase journal entry). It helps to track the purchases of goods to be resold. This is recorded in the purchase journal. Helping you to answer: What is a purchase journal entry? It is an entry typically registered in the books when goods are bought on credit. It lists suppliers, the quantity of goods, and the date of purchase. Companies make hundreds of purchases a day. Some purchases are goods, others are services. Only credit purchases are recorded in the purchase journal. The combination of this ledger helps to prepare financials or final accounts. All businesses maintain accounts to minimize confusion in the future. The purchase journal entries help us in easily tracking the credit purchases. But in accounting it is very vital in purchase entry. It tells you who supplied the goods, how much the goods cost, and when they were purchased.
What is a Purchase Journal Entry?
A business records all its credit purchases in its purchase journal. It helps to track the purchases of goods to be resold. We need to know what a purchase journal entry is like before we create our own. A solid format shall help you with recording everything properly. The format is well made so that no screw-up occurs while writing the journal entry of purchase. Important columns that these format have are date, supplier name, invoice number, ledger folio, amount and description.
Reading a Purchase Journal Entry Format
Let us understand the purchase journal entry in a format. Columns in the purchase journal. These columns help show all the pure details in a crystal-clear way.
| Date | Supplier Name | Invoice Number | Ledger Folio | Amount (₹) | Description |
| 01-04-2025 | Star Traders | INV1001 | LF01 | 10,000 | 50 boxes of pencils |
Credit from “Sinha Furniture” for ₹50,000.
- Supplier Name: This indicates who the goods were purchased from.
- Invoice Number: This helps locate the bill of the purchase.
- Ledger Folio: Links the purchase journal to the ledger.
- Amount: This indicates the total sum of money to be paid.
- Buyer: This provides the information about the buyer.
This format makes it easy for students and accountants to prepare accounting purchase journal entries. Whenever you enter a purchase in accounting, you have to adhere to this format.
Example of Journal Entry for Purchase
To help illustrate this further, let’s look at a purchase journal example.
Example 1
Date: 10th April 2025
Journal Entry: Bought 100 chairs on credit from “Sinha Furniture” for ₹50,000.
Purchase Journal Entry:
| Date | Supplier Name | Invoice Number | Ledger Folio | Amount (₹) | Description |
| 10-04-2025 | Sinha Furniture | INV201 | LF12 | 50,000 | 100 chairs on credit |
This is how the purchase is recorded. It is a credit transaction. So, it is not entered in the cash book. In contrast, it is recorded in the purchase daybook entry.
Example 2
Date: 15th April 2025
Transaction: Purchased 500 notebooks on credit from “Kumar Stationery” for ₹25,000.
Purchase Journal Entry:
| Date | Supplier Name | Invoice Number | Ledger Folio | Amount (₹) | Description |
| 15-04-2025 | Kumar Stationery | INV208 | LF18 | 25,000 | 500 notebooks purchased |
These practice examples give insights about how to record the purchase of each item. They assist in the preparation of accurate recording of the purchase journal.
How to Enter Transactions in the Purchase Journal?
Correctly recording a purchase journal entry is very important. Every business has to do that thing sequentially. The right way ensures that the accounts stay accurate. This is what students need to learn as it is relevant for the final accounts. There are definite steps to recording purchase journal. Follow each step carefully.
- Know Whether the Transaction Is Credit: To see if the purchase was made on credit is the first step. We do not write it in the purchase book, if the cash payment is made. It makes no entry on credit purchases for goods held for resale.
- Collect Invoice And Bill: Invoice or bill for every credit purchase This is useful in knowing the right amount and information.
- Complete the columns in the purchases journal: It is because you need to mention your date, the name of the supplier, the invoice number, amount, and description over there. All of this is done following the same purchase journal entry format.
- Post to ledger: After entering the purchase day book, We enter the details in a supplier’s ledger account.
- Check for mistakes: Check each entry after recording. Check the amount, date, and the name of the supplier are correct. Recording purchases journal entries using this method helps in recording accurate entries. The mistakes can lead to false final accounts.
Demo of Complete Recording
Date: 20th April 2025
Transaction: Purchased 50 printers from “ABC Tech” on credit for ₹75,000.
Purchase Journal Entry:
| Date | Supplier Name | Invoice Number | Ledger Folio | Amount (₹) | Description |
| 20-04-2025 | ABC Tech | INV310 | LF25 | 75,000 | 50 printers purchased |
This entry is complete. Then this entry will get posted in ABC Tech’s ledger account. It explains purchase entry in accounting with proper records.
Why is Recording Important?
Many reasons justify the accounting purchase journal recording.
- It allows you to keep track of purchases during a period.
- It assists to maintain final accounts very easily.
- It does not miss any credit purchase.
- It assists in correctly preparing the ledger accounts.
A new form of financial technology that automates the purchase recording process for a business. That is the reason recording purchase journal rightly is truly significant.
Relevance to ACCA Syllabus
The purchase journal is a basic concept of ACCA Financial Accounting (FA) and Financial Reporting (FR) papers. This allows students to see how for-profit companies make entries for credit acquisits, affecting ledger accounts and both first and final statements. It’s crucial for drafting trial balances, double entry bookkeeping as well as spotting financial discrepancies. It also supports knowledge of control accounts, which is an integral part of the Performance Management and Audit & Assurance modules.
Purchase Journal Entry ACCA Questions
Q1: What type of transaction will be recorded in the purchase journal?
A) All business purchases
B) Goods bought on credit
C) Cash purchases of assets
D)The purchase of services on credit.
Ans: B) On credit sale of goods only
Q2: Where is the first record of a credit purchase of inventory made?
A) Cash Book
B) General Journal
C) Purchase Journal
D) Ledger
Ans: C) Purchase Journal
Q3: A purchase journal does not have which of the following columns?
A) Date
B) Salesperson
C) Invoice Number
D) Supplier Name
Ans: B) Salesperson
Q4: What is the purpose of a purchase journal in accounting?
A) To record all expenses
B) For the management of payroll transactions
C) Journalizes credit purchases in a systematic manner
D) To calculate tax payments
Ans: C) For systematic recording of credit purchases
Q5: What do we do after we record it in purchase journal?
A) Issue a receipt
B) Record in the cash flow
C) Post to ledger accounts
D) File an income statement
Ans: C) —> Credit to ledger accounts
Relavance to US CMA Syllabus
So, in the US CMA Part 1 (Financial Planning, Performance, and Analytics) syllabus, purchase journal entries are classified under external financial reporting decisions. By learning how to journalize and post credit purchases, you increase your understanding of the processes of journalizing and ledgers, which are both important for ensuring accurate implementation of cost accounting cycles, financial reporting cycles, and preparation for variance analysis and budgeting.
Purchase Journal Entry US CMA Questions
Q1 Which of the following is the closest description of the purpose of a purchase journal in managerial accounting?
A) It shows profitability
B) It records depreciation
C) It cites credit purchases to maintain control
D) Calculates break-even point
Ans: C) It monitors credit purchases for control
Q2: A credit purchase in the purchase journal will result in an increase:
A) Cash
B) Expense account
C) Accounts Receivable
D) Accounts Payable
Ans: D) Accounts Payable
Q3: Which financial statement is the most affected by errors in the purchase journal?
A) Statement of Cash Flows
B) Balance Sheet
C) Sales Budget
D) Retaining Earnings Statement
Ans: B) Balance Sheet
Q4: With regards to cost accounting, wrongly recorded journals on purchases would lead to:
A) Production costs only
B) Overhead allocation
C) Inventory valuation
D) Net sales
Ans: C) Inventory valuation
Q5: How would you use a purchase journal for a manufacturing business?
A) When purchasing shares
B) When buying assets on cash
C) When purchasing raw materials on credit
D) Selling goods on credit
Ans: C) While purchasing raw materials on credit
Relevance to US CPA Syllabus
Specifically, the US CPA exam contains types of content that involve very detailed the recording of journal entries, including the purchase journal entries in FAR (Financial Accounting and Reporting) section. It is crucial for the classification of transactions, as well as the understanding of how internal controls are set up and the completion of adjusting journal entries. It’s vital for consolidations, reconciliations and GAAP compliance.”
Purchase Journal Entry US CPA Questions
Q1: Under GAAP, when must a purchase be journalized in the purchase journal?
A) When the cash is paid
B) Upon receiving the invoice
C) At the point of delivery of goods and transfer of title
D) After the payment has been missed
Ans: C) At the point of delivery of goods and transfer of title
Q2: When a business record the credit purchase of goods, which account increases?
A) Cash
B) Inventory
C) Sales
D) Dividends Payable
Ans: B) Inventory
Q3) What does the matching principle have to do with purchase journal entries?
A) Compares the cost of sales to income
B) ALIGNES liabilities with sales
C) Aligns revenue with asset purchases
D) Matches expenses with income
Ans: D) Expenses are matched with revenue
Q4: Which one of the following transactions would not be recorded in a purchase journal?
A) Buy office supplies on credit
B) Cash purchase of machines
C) Buying of merchandise on account
D) Purchase of goods on credit from supplier
Ans: B) Purchase of machinery for cash
Q2: What is the purchase journal used of?
A) Bank Ledger
B) Sales Ledger
C) General Ledger
D) Purchase Ledger
Ans: D) Purchase Ledger
Relevance to CFA Syllabus
As the CFA curriculum isn’t concentrated so much on bookkeeping it has nothing to do with entering to purchase journal entry but the purchase journal entry concepts can be apprehended through Level 1 – Financial Reporting and Analysis. Purchases affect inventory and accounts payable, as well as when expenses are incurred and realized. This information is necessary to evaluate working capital, liquidity, and inventory turnover while conducting financial analysis.
Journal Entry for Purchase CFA Questions
Q1: When you record a purchase of inventory on credit, which of the following is affected?
A) Only cash flow
B) Assets and liabilities
C) Income and equity
D) Equity and expenses
Ans: B) Assets and liabilities
Q2: At what point does an entry in the purchase journal first affect financial statements?
A) Statement of Cash Flows
B) Balance Sheet
C) Income Statement
D) Notes to Accounts
Ans: B) Balance Sheet
Q3: Which ratio can be impacted by entries in a purchase journal?
A) Price-to-Earnings
B) Return on Equity
C) Inventory Turnover
D) Earnings Per Share
Ans: C) Inventory Turnover
Q4: The increase in the number of purchases journal entries in the period can imply that:
A) Higher debt
B) Increased credit sales
C) More cash in hand
D) Inventory purchase increase
Answer: D) Rise in new stock purchases
Q5: Which current liability increases when inventory is purchased on credit?
A) Notes Payable
B) Unearned Revenue
C) Accounts Payable
D) Accrued Interest
Ans: C) Accounts Payable
