Question

why is the purchase journal used for journalizing the purchase of merchandise for resale on the account only?why should i put purchase for items such as paper towels and suppplies on account in the general journal?

Answer 1

The reason why purchase journal is used for journalizing the purchase of merchandise for resale on the account only is due to the fact that the purchase journal is a specialized accounting log that is meant to keep track of only orders made by a company either on credit or an account. As a rule the purchase journal records only credit transactions with regards to merchandise meant for trade (i.e. resale). At the end of the month the total amount in the purchase journal is debited to the purchase account and credited to the accounts payable account. The purchase journal helps in determining the cost of goods sold. It is to be noted that cost of goods sold = beginning inventory + purchases – ending inventory.

Purchase for items like paper towels and supplies on account are recorded in the general journal and not in purchase journal as use of these items are everyday office expenses and not an expense related to trading of goods. Paper towels and use of supplies are administrative expenses and hence cannot be recorded in the purchase journal.