Purchases: debit or credit?
Purchases increases on the debit side and decreases on the credit side: its normal balance is a debit.
Expenses reduce equity through the costs of running the business. They increase with a debit.
Name in each convention
Account names and codes follow each convention; an account that does not exist in a convention is not offered there.
| Convention | Account |
|---|---|
| United States (US textbooks) | Purchases |
| Spain (PGC 2007) | 600 Compras de mercaderías |
| France (PCG 2025) | 607 Achats de marchandises |
| Germany (generic accounts) | Aufwendungen für Waren |
Practice entries that use this account
- Owner takes goods from stock for personal use
- Buying merchandise for cash
- Buying merchandise on credit: invoice total including VAT
- Buying merchandise, paying part now and the rest on credit
- Returning part of a purchase on credit
- Paying a supplier within the discount period
- Paying a carrier for delivering purchased goods
- Buying merchandise with a trade discount
- Buying merchandise on credit with VAT
- Returning goods bought on credit, with VAT
- Buying merchandise with a cash discount on the invoice
- Buying merchandise under the periodic inventory system
- Cash sale with cost of goods sold (perpetual inventory)
- Credit sale with cost of goods sold (perpetual inventory)
- Customer returns goods for a cash refund, restocked (perpetual inventory)
- Recording inventory shrinkage at year end
- Recording the month’s cost of goods sold in one entry
- Period-end cost of goods sold under the periodic system
- Writing inventory down to net realizable value
- Using goods from stock as office supplies
- Returning damaged goods for a cash refund
- Recording an inventory count surplus
- Donating goods to a charity
- Transferring unsold purchases to inventory at year end