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What is a Purchase Ledger?

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  • Written By: Jim B.
  • Edited By: Melissa Wiley
  • Last Modified Date: 03 December 2016
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A purchase ledger is a record kept by a business for accounting purposes of all payments made and money currently owed to creditors. The purpose of this is to keep accurate records and be aware of how much money is owed at any given time. In the past, purchase ledgers were kept by hand, but now most big businesses use computerized ledgers to keep up their records. It is common for a purchase ledger to contain individual accounts for each business supplier along with the balance owed to each.

Running a successful business requires diligent record keeping, as payments and receipts of payment are taking place at an often frantic pace each and every day. A business that loses track of the comings and goings of these monies runs the risk of coming up short when it comes time to satisfy its debts. For this reason, a purchase ledger is kept with the specific intention of keeping track of both the payments made and the money owed to those that provide the business with goods and services.

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Businesses usually enter into a relationship with suppliers based on credit, meaning that no payment actually changes hands at the time of a purchase, but the money is owed to the suppliers to be paid at a later date. Knowing how much money is owed to each supplier is a necessity, and a purchase ledger solves this problem. Each individual supplier is usually represented in a ledger by his or her own account, which records the purchases made, any payments the business has made for these purchases, and the outstanding balance owed to the supplier.

It is wise for businesses to update their purchase ledger in regular fashion to keep close watch on how much money is owed to creditors. In addition, a system for record- keeping that is easy to follow is necessary so that confusion doesn't result in paying out too little or even too much to suppliers at a certain time. This can be achieved by numbering each purchase and payment so that they're easy to locate and identify.

All of this record keeping has been made much easier for businesses with the advances made in computer technology. Software is readily available that essentially acts as a digital purchase ledger, with payments and purchases recorded with just a few simple keystrokes. Even if a business has computerized its records of payments and purchases, it must still make sure to be diligent about updating the entries to keep its records from becoming dated.

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