A bought ledger is a system in

accounting Accounting, also known as accountancy, is the process of recording and processing information about economic entity, economic entities, such as businesses and corporations. Accounting measures the results of an organization's economic activit ...

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 propert ...

s. A bought ledger differs from a purchase ledger, which is a subledger account that contains the goods and services a business has purchased from a supplier 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, tab, or bill of costs is a commercial document that includes an itemized list of goods or services furnished by a seller to a buyer relating to a sale transaction, that usually specifies the price and terms of sale, quanti ...

s and

credit note A credit note or credit memo is a commercial document, utilized in business transactions to indicate a reduction in the amount owed by a customer or owed to a supplier. If the customer returns goods to the seller, the invoice previously issued is ...

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 cred ...

system, with the

balance Balance may refer to: Common meanings * Balance (ability) in biomechanics * Balance (accounting) * Balance or weighing scale * Balance, as in equality (mathematics) or equilibrium Arts and entertainment Film * Balance (1983 film), ''Balance'' ( ...

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 accounting transactions are recorded. Each account has: * an opening or brought-forward balance; *a list of transactions, each recorded as either a debit or credit in separate columns (usu ...

, 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 c ...

. The concept of

double-entry bookkeeping Double-entry bookkeeping, also known as double-entry accounting, is a method of bookkeeping that relies on a two-sided accounting entry to maintain financial information. Every entry to an account requires a corresponding and opposite entry to a ...

is that debits balance the credits at all times. For convenience, the main

trial balance A trial balance is an internal financial statement that lists the adjusted closing balances of all the general ledger accounts (both revenue and capital) contained in the ledger of a business as at a specific date. This list will contain the name ...

lists some accounts containing many entries as simply a single control figure. There is then a separate physical ledger for the summarized 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 minimizes the number of negative entries to make/read.

References

{{DEFAULTSORT:Purchase Ledger Accounts payable