Question

Why is the purchase journal used for journalizing the purchase of merchandise for resale on account only? Why should I put purchases for items such as paper towels and supplies on account in the general journal?

Answer 1

1. Purchase Journal is a separate book maintained in the company to keep the track the information of merchandise purchased on account or on credit. Once the Purchase Journal is filled with the details of the purchases on account, a single entry will be passed to transfer the purchase expense to income statement and credit to Accounts Payable

2. Paper Towels and other supplies on account are purchased to be used in office and is not meant for trading thus the same is charged separately to income statement as Administrative Expense.