The journal entry for the purchase of goods on credit is as follows:
Debit: Purchases (Expense Account) Credit: Accounts Payable (Liability Account)
When a business purchases goods on credit from a supplier or vendor, it means that the goods are received, but the payment is not made immediately. Instead, the business promises to pay the supplier at a later date, typically within a specified credit period.
The journal entry records the increase in the purchases expense account, representing the cost of goods acquired. At the same time, the accounts payable account is credited, reflecting the liability the business owes to the supplier for the purchase.
For example, if a business purchases $1,000 worth of goods on credit from a supplier, the journal entry would be:
Debit: Purchases $1,000 Credit: Accounts Payable $1,000
In this entry, the Purchases account is debited by $1,000, and the Accounts Payable account is credited by $1,000. The debiting of the Purchases account reflects the increase in expenses, while the crediting of the Accounts Payable account indicates the increase in the liability owed to the supplier.
It's important to note that the specific accounts used in the journal entry may vary depending on the accounting system and chart of accounts used by the business. Always follow the accounting practices and policies of your business or consult with a qualified accountant for accurate and appropriate recording of financial transactions.