Are Purchases a Debit or Credit? Short Answer With Journal Entries

Short answer: purchases are a debit. When you buy goods to resell, the purchase is recorded on the debit side. The matching credit goes to cash if you paid immediately, or to the supplier's account if you bought on credit. Purchase returns and discounts you receive from a supplier appear on the credit side because they reduce the cost of buying.

Purchases are the mirror image of sales: what you sell is credited as revenue, and what you buy to resell is debited as a cost. For the other side of the picture, see is sales revenue a debit or credit?

Why are purchases a debit?

Goods you buy are either an asset waiting to be sold or a cost that will be deducted from sales when you calculate profit. Assets increase with debits, and costs and expenses also increase with debits, so a purchase is debited either way.

The other side shows how you paid. Less cash is a credit, and more owed to a supplier is also a credit because liabilities increase with credits. The general rules are explained in OpenStax's account-balance reference.

Purchases or inventory: which account should you use?

The name of the debited account depends on how you track stock:

• Under a periodic system, goods are recorded in a purchases account, and the cost of sales is calculated at period end after counting the remaining stock.
• Under a perpetual system, goods are recorded directly in inventory, and each item's cost moves to cost of sales when it is sold.

Either way, the answer is the same: a purchase is a debit. OpenStax's perpetual-system purchases chapter and its periodic-system appendix show the entries in detail.

Example: a credit purchase followed by a partial payment

You buy goods from a supplier for SAR 2,000 on account. When the goods arrive:

• Purchases: debit 2,000.
• Supplier account: credit 2,000, because what you owe the supplier increased.

Ten days later you pay the supplier 1,200:

• Supplier account: debit 1,200, because what you owe decreased.
• Cash: credit 1,200, because cash left the till.

You still owe 800. The payment is not a new purchase, because the goods were recorded when they arrived. Recording them twice inflates costs and shows less profit than you really made.

When do purchases appear on the credit side?

These are the most common entries that reduce purchases and therefore appear as credits:

• Purchase returns: you send back damaged goods worth 150, so you debit the supplier account 150 and credit purchase returns or inventory 150, leaving 650 owed.
• Supplier discounts: if a supplier gives you a discount on an invoice you recorded in full, the discount is credited because it reduces the cost of buying.
• Corrections: a purchase invoice recorded twice is reversed with a credit for the extra amount.

Track the effect of a return on both quantities and balances with the sales and purchase returns workflow, so the value does not drop in your accounts while the items stay in stock.

Not every purchase belongs in purchases

The purchases account is for goods you buy to resell. A display fridge or point-of-sale device used in the shop is a fixed asset, and paying for electricity or rent is an expense. All of them are debited when bought, but putting each in the right account makes your cost of goods and profit clearer. Expenses are explained separately in are expenses a debit or credit?

Applying the idea in Zawid Accounts

In Zawid Accounts each supplier has a separate account: you record what you bought on credit and the payments you made, and the remaining balance appears without writing journal entries. Start with the guide to adding an item and recording your first stock entry and the guide to adding your first customer or supplier.

Before paying a supplier, compare their balance in the app with their statement. A difference is usually an unrecorded return or a payment dated differently. You can start on the free plan, and optional Pro features are available if you need them.