Purchases ledger control account format

The standard format

1. Balance b/d (amounts owed to suppliers)
2. Add: credit purchases (from the purchases day book)
3. Less: payments to suppliers
4. Less: returns outwards
5. Less: discounts received
6. Less: set-offs (contra with sales ledger)
7. Balance c/d (closing amount owed)

Filled example

Notes

• Credit purchases and returns come from the day books, not from individual invoices.
• Discounts received and contra set-offs both reduce the amount owed.
• The closing balance should equal the total of the supplier accounts in the purchases ledger.

Building and reading this format

The purchases ledger control account mirrors the sales ledger control account, but everything is reversed. It summarises what the business owes to all its credit suppliers. Trade payables are a liability, so the account has a credit balance.

Anything that makes the business owe more goes on the credit side. Anything that makes it owe less goes on the debit side. If you remember this, you can rebuild the layout without memorising it.

On the credit side, start with the opening balance of payables, for example RM5,600 owed on 1 January. Add total credit purchases from the purchases day book. This is usually the largest credit, because buying on credit is the main reason the business owes money.

Add any interest a supplier charges on a late account.

The debit side lists the reasons the amount owed fell. These are payments to suppliers, purchases returns (goods sent back) and contra entries. They also include discount received, a reward for paying promptly that clears part of the debt without cash leaving.

A contra entry sets off a balance when the firm is both a customer and a supplier. The closing balance is the figure that balances the account. It is carried down and should agree with the list of supplier balances from the purchases ledger.

The account also shows buying and paying habits. Heavy purchases with light payments mean closing payables are rising, say to RM7,300. That may signal cash flow pressure or simply generous supplier terms.

A large discount received suggests the firm pays early, which often signals healthy cash. If the control account and the supplier list disagree, there is an error to trace.

Most marks are lost on side placement. Discount received looks like income, so students put it on the credit side. It reduces what is owed, so it goes on the debit side.

Purchases returns also go on the debit side. A contra entry is a debit here but a credit in the sales ledger control account, so students often get one right and the other wrong. Cash purchases never create a payable, so leave them out.

The test is the mirror of the receivables test: does this item make the business owe suppliers more or less? More goes on the credit side and less goes on the debit side. Also label "balance b/d" and "balance c/d", carry the closing balance down, and make both sides total the same figure.

If control accounts keep tripping you up, we can help. One of our teachers can compare the sales and purchases versions side by side with you so the sides stop feeling like guesswork. Book a trial class

Related how-to

• How to prepare a purchases ledger control account
• How to post from books of prime entry to the ledger

These formats are standard accounting practice with our own figures. Check your board's exact requirements on the exam boards page.