IGCSE Purchases Ledger Control Account
We will understand what a purchases ledger control account is; learn how to prepare the account, including contra entries between the sales ledger control account and the purchases ledger control account.
Related Lessons:
What Is Purchases Ledger Control Account
Trade payables are suppliers who sold goods or provide services to the business on credit. The accounts of these suppliers are recorded in the purchases ledger.
The purchases ledger control account is a summary of the purchases ledger.
It is therefore also known as the Total Trade Payables Account and contains the same entries as individual trade payables accounts.
As payment to these suppliers are to be made at a later date, trade payables are current liability to the business.
Entries In Purchases Ledger Control Account
The purchases ledger control account is a credit nature account and contain the following information:
On the credit side of the T-account, it has:
- Credit purchases recorded as “Purchases”
- Late payment fees recorded as “Interest expense”
On the debit side of the T-account, it has:
- Goods returned recorded as “Purchases return”
- Payment made recorded as “Cash or Bank”
- Cash discount received recorded as “Discount received”
- Offset against a trade receivable recorded as “Sales ledger control account”
A contra or offset transaction occurs when a trade payable is also a trade receivable of the business. The smaller balance between the two accounts is used as the offset amount.
The purchases ledger control accounts obtain its information from the following sources:
- Purchases Journal for purchase of goods or services
- Purchases Return Journal for purchase return
- Cash Book for payment made and the discount received obtained
- General Journal for late payment fees charged
Illustration on Preparing Purchases Ledger Control Account
You may want to pause the video and try to prepare the purchases ledger control account to strengthen your understanding of the topic, before continuing with the explanation.