Journal Entry for Purchase of Merchandise
Merchandise is the term used to refer to any goods purchased for the purpose of resale in the ordinary course of business. The term is regularly used in trading organizations.
When Merchandise Are Purchased for Cash
On 1 January 2016, John Traders purchased merchandise for $15,000 in cash from Sam & Co. The journal entry for this purchase is shown below.
When Merchandise Are Purchased on Account
If merchandise are purchased on account, the accounts involved in the transaction are the purchases account and accounts payable account. The purchases account is debited and the accounts payable account is credited.
On 1 January 2016, John Traders purchased merchandise for $15,000 on account from Sam & Co. The journal entry for this purchase would be made as follows: