Credit purchase can be ascertained as the balancing figure in the ___ ...
Ascertaining Credit Purchases in Accounting
Credit purchases are the purchases made on credit by a business from its suppliers or creditors. It is an essential aspect of accounting as it helps in identifying the liabilities of a business. The credit purchase can be ascertained by calculating the balancing figure in the creditors' account.
The following are the steps involved in ascertaining credit purchases in accounting:
Step 1: Record the credit purchases
The first step is to record the credit purchases made by the business in the purchases account. The purchases account is a nominal account that records the cost of goods purchased for resale or for use in the business. The credit purchases made by the business during a particular period can be ascertained by calculating the total of all purchases made on credit.
Step 2: Record the payments made to creditors
The next step is to record the payments made to the creditors in the creditors' account. The creditors' account is a personal account that records the amount owed by the business to its suppliers or creditors. The payments made to the creditors during a particular period can be ascertained by calculating the total of all payments made to the creditors.
Step 3: Calculate the balancing figure
The balancing figure in the creditors' account represents the amount owed by the business to its creditors at the end of the accounting period. It can be calculated by subtracting the total payments made to the creditors from the total amount owed to the creditors at the beginning of the accounting period.
Step 4: Ascertain credit purchases
The balancing figure in the creditors' account represents the credit purchases made by the business during the accounting period. It is because the amount owed to the creditors at the beginning of the accounting period includes the credit purchases made in the previous period, and the amount owed at the end of the accounting period includes the credit purchases made in the current period.
Conclusion
In conclusion, credit purchases can be ascertained by calculating the balancing figure in the creditors' account. The balancing figure represents the credit purchases made by the business during the accounting period and is calculated by subtracting the total payments made to the creditors from the total amount owed to the creditors at the beginning of the accounting period.
Credit purchase can be ascertained as the balancing figure in the ___ ...
Credit sales are ascertained as the balancing figure of the Total Debtors Account and Credit Purchases are ascertained as the balancing figure of the Total Creditors Account.
Creditor's account is prepared to record the transaction of payment made to the supplier against the credit purchases and discount allowed by them. Credit purchases are recorded by debiting the purchases account and crediting the creditors account.