Journal Entry for Goods Purchased on Credit
Credit Purchase Journal Entry is recorded when a company acquires goods or inventory from a supplier without making an immediate cash payment.
It involves the following accounts:
This account represents the cost of goods or inventory purchased on credit.
This account represents the amount owed to the supplier for the goods purchased on credit.
Credit Purchase Journal Entry
Example#1
Let’s say a company purchases inventory items worth $1,000 on credit from a supplier. The journal entry would be as follows:
Solutions:
The journal entry records the increase in the Purchases account (representing the cost of inventory purchased on credit) with a debit, and the increase in the Accounts Payable account (representing the amount owed to the supplier) with a credit.
Example#2
On 1st June, ABC Inc purchases goods from XYZ Inc. for $4,000 on a credit period of 30 days. Pass Journal entry for credit purchases in the books of ABC Inc.
Solutions:
1. When Credit Purchase of Goods takes place –
2. When consideration (value or price) of the goods is being duly paid –
