Entries for Purchases Transactions Accounting Entries Used to Record the Purchase And Payment of Goods
Entries for Purchases Transactions Accounting
Entries Used to Record the Purchase And Payment of
Goods
When goods are purchased with cash, the following entry is necessary:
debit Purchases, credit Cash
- When goods are purchased on credit, the following entry is necessary:
debit Purchases, credit Accounts Payable - When goods are purchased on credit, but are paid back early due to a cash discount
incentive, the following entry is necessary:
debit Accounts Payable, credit Cash, and credit Purchases Discount.
debit Accounts Payable, credit Cash, and credit Purchases Discount
Purchases Discounts
seller will often offer a cash discount to the buyer for an early payment. Credit terms
are the conditions for the payment agreed upon by the buyer and the seller. Cash
discounts are stated in a fractional form with the percentage of discount in the Chart of Accounts
numerator and the number of days in the denominator. The credit period, or number
of days a buyer can pay without incurring a finance charge, is stated in NET days or n/
days. Example: terms 3/15, n/60 means a buyer will receive a 3% cash discount if paid
within 15 days of the invoice date, and the buyer has a maximum of 60 days to pay the
entire debt amount. link
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