Definition
The Purchase Day Book, also known in the US as the “Bought Day Book”, is a specialized accounting book used to record all credit purchase transactions. This book is pivotal for tracking companies’ credit purchases which include goods bought for resale and other business expenses paid on credit. Entries in the Purchase Day Book are made from purchase invoices received from suppliers. Once entries are made, these transactions are subsequently posted to the individual supplier accounts in the General Ledger.
Examples
-
Merchandise Purchase: A retail company buys inventory worth $10,000 on credit from a supplier. This transaction is recorded in the Purchase Day Book with the date, supplier name, invoice number, and amount.
-
Office Supplies: A company purchases office supplies on credit costing $2,000. The transaction, including the supplier details and total cost, is documented in the Purchase Day Book.
-
Machinery Acquisition: A manufacturing firm acquires machinery valued at $50,000 on credit. This significant transaction is recorded in the Purchase Day Book for future reference and posting to the General Ledger.
Frequently Asked Questions (FAQs)
What is the purpose of the Purchase Day Book?
The main purpose of the Purchase Day Book is to track all credit purchase transactions within a business. This helps in keeping a detailed record that ensures accuracy and accountability when posting to the General Ledger.
Is the Purchase Day Book the same as the Purchase Ledger?
No, the Purchase Day Book is a journal where the initial recording of credit purchases happens, while the Purchase Ledger is an account that shows the individual supplier balances once transactions are posted from the Purchase Day Book.
Can cash purchases be recorded in the Purchase Day Book?
No, the Purchase Day Book is strictly for credit purchases. Cash purchases are typically recorded directly in the Cash Book or relevant expense accounts.
How often should transactions be posted to the General Ledger from the Purchase Day Book?
Transactions should be periodically posted from the Purchase Day Book to the General Ledger, generally at the end of the accounting period, to ensure that all accounts reflect the accurate financial position of the business.
What details are included in a Purchase Day Book entry?
A typical entry in the Purchase Day Book includes the date of transaction, supplier name, invoice number, description of goods or services purchased, and the amount of the transaction.
Related Terms
- General Ledger: A complete record of all financial transactions over the life of a company.
- Trial Balance: A statement of all debits and credits in a double-entry account book, with any discrepancies indicating errors.
- Credit Purchase: When goods or services are acquired with the promise to pay later, as recorded in the Purchase Day Book.
- Purchase Ledger: An account book that tracks the amount owed to each supplier.
Online References
- Investopedia: What is a Purchase Day Book?
- Accounting Basics: Purchase Journal
- Wikipedia: Purchase Journal
Suggested Books for Further Studies
- “Financial Accounting for Dummies” by Maire Loughran
- “Accounting Made Simple: Accounting Explained in 100 Pages or Less” by Mike Piper
- “Intermediate Accounting” by Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield
Accounting Basics: “Purchase Day Book” Fundamentals Quiz
Thank you for exploring the intricacies of the Purchase Day Book and testing your knowledge with our comprehensive quiz. Keep enhancing your expertise in accounting!
