Cash Purchases Journal Entry
The journal entry for cash purchases is recorded when a company pays for goods or services in cash.
It involves the following accounts:
- 1. Debit: Purchases or Expense Account
This account represents the cost of goods or services purchased. Depending on the nature of the purchase, you may use specific expense accounts such as “Inventory” for goods purchased for resale or “Supplies” for office supplies.
- 2. Credit: Cash or Bank Account
This account represents the cash paid for the purchases.
Example#1
Let’s assume a company purchases inventory items worth $1,000 in cash. The Cash purchases journal entry would be as follows:
The journal entry records the increase in the Purchases account (representing the cost of inventory purchased) with a debit, and the decrease in the Cash/Bank account (representing the cash payment made) with a credit.
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