 In this presentation we will take a look at the Purchases Journal for a service company. The Purchases Journal will be made when we make purchases but that name can be a little bit deceiving because it means purchases not for cash but on account or in other words it's really an accounts payable journal. Anything we have that's going to be dealing with accounts payable typically purchases usually thinking of if we have inventory then it would be inventory but for a service company it might be something like supplies that would be our typical purchase that we would make on account. Note the Purchases Journal like many of these special journals will be something that will be used in more of a manual system a system done by hand however it's also useful to use or know about when using an automated system and a computer system because one it's often the case that we want to print out reports similar to what would be look like a purchase journal and two it's good to know different types of systems to know what the similarities and differences are in order to better understand any system and the critical components to them as well as what can be adjusted within them. What we're going to do with the Purchases Journal is record these transactions during the month into the journal rather than making a separate journal entry for each transaction that making the process quicker then we will sum these up at the end of the month in our case the month it could be for a different time period it could be for a day it could be for a week it could be for a month we'll be working with a month summing this up at the end of the month then recording that to the a journal entry a normal journal. So let's see that process here we're going to have the Purchases Journal we're going to enter our data into the Purchases Journal throughout the time period in our case the month at the end of that time period then we are going to create a journal entry that will be used to post to the general journal note that we will also as we do this need to be creating the accounts payable subsidiary ledger this is going to be a key component because the Purchases Journal will be dealing with vendors so we're going to be dealing with accounts payable making a meaning that means that account means that we owe people money or companies money we need to list out not just the dollar amount then or not just the the date that the dollar amounts happened but who we owe the money to and that will be done with the accounts payable subsidiary ledger we will then of course use that to generate the trial balance so let's go through some transactions here we're going to have a Purchases Journal our first transaction we're going to say is for the vendor LH&G so we had a vendor LH&G on 75 that had 1500 purchased from them the other side is going to go to other in this case because it's not going to go into our normal accounts in this case being the landscaping account so we know that every time we have the Purchases Journal because we are dealing with purchases it's always going to go into accounts payable meaning we're always going to credit accounts payable we're going to make another list of accounts for those accounts that we are going to be debiting most often too and hopefully the Purchases Journal will be most effective when there's only one or two accounts that we that we use quite often to make purchases such as like landscaping supplies but if that's not the case I mean there's going to be a lot of times where we could be making purchases on account kind of like a credit card where we didn't buy the normal items and therefore then we would have to make our other column and decide how many columns we want to use and then how to utilize the other column the other column will have to break out at the end of the time period once we record all of our transactions we're also going to record this to the accounts payable subsidiary ledger as we go note we're not recording to the general ledger or making a journal entry this is going to be the subsidiary ledger and we're going to record who we owe money to as we go in this case LH&M we're going to say that we owe them 1500 bringing the balance up to 1500 we will continue to track this who we owe money to as we go note this is kind of a special thing we need to do special journals for the accounts payable account and a similar one would be done for accounts receivable next we're going to say that on seven six we have a company made a purchase we made a purchase in other words on account accounts payable of 185 the other side this time going to the landscaping supply so we purchase landscaping supplies increase the accounts payable by the 185 as will always be the case when using the purchases journal the other side then going to what would typically be our most normal account for this type of company landscaping supplies we're then going to record that once again to the accounts payable subsidiary ledger and so here we have a company we got the 185 bringing the balance up to 185 note once again this isn't the general ledger this is the subsidiary ledger by account for accounts payable only next we're going to have on seven eight we have b company we had another payable that what's going to be for 315 the other side once again going to other others going to be the other side for this item here so we don't know exactly what we made the payment for but it's not landscaping supplies and therefore we're going to put it into other category breaking that out at the end of the time period when we record this information into the general journal we are going to record it now into the subsidiary ledger so within the subsidiary ledger we're going to put a credit to the b company this is not the general ledger it is the subsidiary ledger increasing the balance to that 315 next we're going to have purchases journal on 718 l h and g we've got 140 into accounts payable the other side is this case is going to go to our normal account landscaping supplies so there's landscaping supplies if we then total this up we're going to say that we have a total of the 1500 plus the 185 plus the 315 plus the 140 gives us 2140 the 185 plus the 140 gives us 325 the 1500 plus the 315 gives us the 1008 15 we also want to see that last 140 here on the l h and g so there's the 140 owed to accounts payable here it is in l h and g bringing the balance up from 1500 by 142 1006 40 now we're going to use this information in order to make our journal entry so our journal entry so we'll use this information in order to make the journal entry so note what we have here we've got accounts payable it's going to be a credit we've got the landscaping supplies that will be one of the debits and then the other side we're going to have to break this out the 1500 and the 315 to the relevant accounts probably should be adding a note here so that we can put what those relevant accounts will be as well so note that it would be useful to have another column here giving us a note an explanation as to where the other column will go in addition to the vendor sometimes the vendors will tell us what that will be of course because we will have the same vendors multiple times so if we look at the transaction we're going to say landscaping is the 325 that we're pulling over we're going to say that the lawn equipment that's what that 1500 was so the 1500 in the other account is going to lawn equipment then we've got advertising expense that was in the other category so on account we bought on account advertising expense now putting that into the expense account and then finally the accounts payable for the total going up in the credit direction 2150 so then the 325 plus the 1500 plus 315 then would add up to the 2140 we're then going to record this information and post it to the general ledger so here we have the general ledger down here we're going to say that landscaping supplies is going to go from zero up by this 325 to 325 then we've got the lawn equipment going from zero up by the 1500 to 1500 then we've got the advertising here's advertising we're going to take this posting up here so we've got it going from zero up by the 315 to the 315 and then finally accounts payable posting out accounts payable it going from zero up by the 2001 40 to the 2001 40 note we're only looking at the general ledger accounts for those items that we are dealing with here we can then use that to generate the trial balance so if we look at the trial balance the ending balances in for the landscaping supplies 325 here landscaping supplies 325 there we got the advertising expense 315 here advertising expense 315 there we've got the lawn equipment 1500 here we've got the lawn equipment 1500 there we've got the accounts payable 2001 40 here and 2001 40 there next we want to just compare and be able to see that within this account where we're focusing here on we have 2001 40 that represents money that we owe to vendors we want to break that out by who we owe it to the general ledger doesn't break that out it only gives us the dates as to when they came about and here we even have to go back to the subsidiary over the the purchases journal in order to see the actual dates because we've just recorded one number at the end of the time period in this case the end of the month we also want to see that by who we owe the money to so in this case l h and g a company b company one thousand six forty one hundred and eighty five and three fifteen is what is owed respectively if we add those up then they add up to the 2001 40 which of course matches the general ledger and the trial balance