What are the entries of posting credit purchases into the purchases ledger control account?
Answer Details
The entries for posting credit purchases into the purchases ledger control account are:
- Debit the purchases account: This is because the purchases account represents the total amount of credit purchases made by the business during a given period.
- Credit the purchases ledger control account: This account represents the total amount owed by the business to its suppliers for credit purchases made during the same period. By crediting this account, we are increasing the amount owed to suppliers, which is a liability for the business.
When a credit purchase is made, the invoice received from the supplier is recorded in the purchases day book. The details from the purchases day book are then posted to the individual supplier's account in the purchases ledger. Once all the individual supplier accounts have been updated, the total amount of credit purchases for the period is calculated, and this total is then posted to the purchases account in the general ledger.
Finally, the same total amount of credit purchases is also posted to the purchases ledger control account in the general ledger, but as a credit entry. This allows us to keep track of the total amount owed to suppliers at any given time.
To summarize, when posting credit purchases into the purchases ledger control account, we debit the purchases account to record the total amount of credit purchases made by the business, and we credit the purchases ledger control account to keep track of the total amount owed to suppliers for credit purchases made during the same period.