Purchases ledger

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Purchases ledger
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Author: Bartłomiej Borówko

Purchases ledger is called the part of the account structure that saves documented notes of the whole purchases, that were created by the forces of the company and that costs, that were paid back for that purchases. The phrase “ledger” is a mention to that time, during which accountancy management was held in the big books, the name of which was ledger (M. Banks 2005, p.68).

The role and function of purchases ledger

The another name of the control accounts is - the total accounts. In the case when the trial balance cannot be balanced and it is hard to definite the mistake, accounting records should be instantly reviewed. Usually it takes some while of time for doing that. The control procedure might be finished faster when sales ledger account (that includes the records about the accounts of the obligors) and purchased ledger account (that includes the records about the accounts of the obligee) exist. They operate in a role of the verification on the particular account inside such ledgers. But the same as the trial balance, that accounts have only the ability to verify the arithmetical precision: mistakes like lapse or commission cannot be uncovered by these control accounts (C. Coucom 2012, p. 221).

Usage of the purcheses ledger

Sometimes purchase bookings can be created on the material, that was carbonized. That's why exemplar on the top is provided for the distributor. The another exemplar should be hold in the file. Moreover, purchase orders also can be made and saved at the computer programs, and transmitted to the distributor in the electronic way. It can be done both: by sending an email or by electronic information exchange. The purchasing structure supplies the entrance for the purchase ledger at the invoices structure. Except this invoices will be connected with the supply management and production functions of the company which provides or produces the items. The raw materials and items that were bought will enhance the number of the goods in the stock. The stock management or producing schemes will estimate in what time will appear the need to order items again (in the moment when the reserve is used). But whole functions inside the company will require items of some definitive types. That's why the connection among the purchasing set and the big part of the functions will appear inside the company. Purchasing also takes the responsibility for creating agreement documents of the services delivery(M. Banks 2005, p.68).

The invoices are counted in consistent sequence, following to which that accounts are obtained, and opened in the book of the purchases at the same sequence. Specific columns are maintained. They are created for the whole significant factors, that are connected with the accounts, for example, the departments that were engaged in that purchase. The finish number of columns that represent “debit” side must be the same as the whole side of the “credit” data(J. W. Baker 1952, p. 202).

Sales ledger and purchases ledger

Sales ledger monitor account looks like the account of the obligor. However that account maintains operations that are connected to all obligors, not only for one of them. To create a sales ledger control account, should be data, that is provided in the journal of the first records(C. Coucom 2012, p. 222).

Purchases ledger control account has the familiar functions and aims as the sales ledger control account. That account operates as a verification for the particular accounts of the obligee. It has to be made irrespectively and not made on the source of the information provided by individual obligees’ accounts. The sales ledger control account should be balanced and composed on the finish of the financial period (usually it is on the over of the month). The whole number of the balances on every separated obligees’ accounts must be the same as in the monitor account. In the situation when there is a difference between them, it means that there is a mistake in some of that accounts and review should be continued(C. Coucom 2012, p. 224-225).

The verification usually discovers the reasons. Later for verification whether the discovered element lead to the break of the balance, reconcilement is done(A. Sangster, F. Wood 2008, p. 374).

Advantages of the control accounts

If the complement system of the accounting documented notes is kept, it should be often a regulatory accounts for purchases ledger, and also, for sales ledger ready. Pluses of creating such accounts are(C. Coucom 2012, p. 221):

  • That accounts are able to help in finding the mistakes in the situation when it is impossible to balance the trial balance.
  • That accounts are the evidence of the arithmetical precision toward that ledgers they monitor.
  • The balance mentioned in them must be the same as the number of whole receivables and whole number of the payables. That's why that data is accessible instantly.
  • Financial declarations project is able to be ready for the little period of time. The reason of that lies in the balances that are supplied due to that control accounts.
  • That accounts contribute in the fraud decreasing. Control accounts must be made by people, that were not engaged in creating the records in that exactly ledgers.