A bought ledger is a system in
accounting
Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "languag ...
by which a business records and monitors its
creditor
A creditor or lender is a party (e.g., person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property ...
s. The purchase ledger contains the individual accounts of suppliers from whom the business has made purchases on
credit
Credit (from Latin verb ''credit'', meaning "one believes") is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately (thereby generating a debt), ...
. Information on
invoice
An invoice, bill or tab is a commerce, commercial document issued by a sales, seller to a buyer relating to a sale transaction and indicating the product (business), products, quantities, and agreed-upon prices for products or Service (economic ...
s and
credit note
A credit note or credit memo is a commercial document issued by a seller to a buyer. Credit notes act as a source document for the sales return journal. In other words, the credit note is evidence of the reduction in sales. A credit memo, a con ...
s received, and payments made, are recorded in the supplier's account using the
debits and credits
Debits and credits in double-entry bookkeeping are entries made in account ledgers to record changes in value resulting from business transactions. A debit entry in an account represents a transfer of value ''to'' that account, and a credit en ...
system, with the
balance
Balance or balancing may refer to:
Common meanings
* Balance (ability) in biomechanics
* Balance (accounting)
* Balance or weighing scale
* Balance as in equality or equilibrium
Arts and entertainment Film
* ''Balance'' (1983 film), a Bulgarian ...
of each account at a given moment representing the amount currently owed to that supplier.
Historically, the purchase ledger was maintained in book form, hence the term
ledger
A ledger is a book or collection of accounts in which account transactions are recorded. Each account has an opening or carry-forward balance, and would record each transaction as either a debit or credit in separate columns, and the ending or ...
, but in modern practice it is much more likely to be held on computer using
accountancy software or a
spreadsheet
A spreadsheet is a computer application for computation, organization, analysis and storage of data in tabular form. Spreadsheets were developed as computerized analogs of paper accounting worksheets. The program operates on data entered in cel ...
.
The concept of Double-entry Bookkeeping is that debits balance the credits at all times. For convenience the main Trial Balance lists some accounts containing many entries as simply a single control figure. There is then a separate physical Ledger for the summarised area, which could conveniently be managed on its own, often at physically separate locations from the main ledger book. The Purchase Ledger is a common example of this.
The purchase ledger will ordinarily be an overall credit (liability) balance, unless credit notes or over-payments exceed the credit balance. However within itself, it is usual to show all invoices as positive figures, and payments as negative entries, as this minimises the number of negative entries to make/read.
{{DEFAULTSORT:Purchase Ledger
Accounts payable