Emin Radwan In: Category - Journal EntriesWhat is the journal entry for purchased goods on credit?credit purchasejournal entrypurchased goods on credit ShareFacebook1 AnswerVotedRecent Dheeraj 2020-08-26T18:24:39+05:30Added an answer on August 26, 2020 at 6:24 pm This answer was edited. It is believed that every organization requires goods for running its business. Goods can be purchased in two different ways- on cash and credit. Most of the companies prefer credit purchase of goods over cash. I would like to explain to you the meaning of credit purchases followed by journal entry and simple practical example.Purchased Goods on CreditIn simple terms, when an organization (or) customer purchases the goods from the seller (or) supplier and agrees to pay the consideration (value or price) of the goods on some future date then it is called as credit purchases. Whenever credit purchase takes place accounts payable account/sundry creditor is created.Accounts payable increases when the organization keeps on purchasing goods on credit. It is considered as a short-term debt that an organization owes to another organization during the ordinary (or) normal course of business.Journal Entry for goods purchased on creditModern Accounting Approach-DateParticularsL.F.AmountNature of AccountAccounting Rule1st MarchPurchases a/c25,000ExpenseDebit The Increase in Expense To Accounts Payable/Supplier a/c 25,000LiabilityCredit– The Increase in Liability.Traditional Accounting ApproachDateParticularsL.F.AmountNature of AccountAccounting Rule1st MarchPurchases a/c25,000NominalDebit– All expenses and losses. To Accounts Payable/Supplier a/c 25,000PersonalCredit– The giver. Practical ExampleOn 1st June, Alex Co. purchases goods from Max Co. for 2,00,000 on credit period of 30 days. Pass Journal entry for credit purchases in the books of Alex Co. In the Books of Alex Co.1. When Credit Purchase of goods takes place-DateParticularsL.F.AmountNature of AccountAccounting Rule1st JunePurchases a/c2,00,000ExpenseDebit- The Increase in Expense. To Accounts Payable/Max Co. a/c 2,00,000LiabilityCredit- The Increase in Liability.(Being goods purchased from Max Co. on credit).2. When consideration (value or price) of the goods is being duly paid-DateParticularsL.F.AmountNature of AccountAccounting Rule1st JulyAccounts Payable/Max Co. a/c2,00,000LiabilityDebit- The Decrease in Liability. To Cash/Bank a/c 2,00,000AssetCredit- The Decrease in Asset.(Being consideration paid for the goods purchased on credit).0Reply Share ShareShare on FacebookShare on TwitterShare on LinkedInShare on WhatsAppLeave an answerCancel replyYou must login or register to add a new answer.