Purchases · Level: Exam
Journal entry: Purchase partly in cash, partly on credit
Part is paid at once and the rest later, so the credit side has two accounts that add up to the gross amount.
Worked example
We buy goods from Hughes Trading for £8,000.00 plus 20% VAT. We pay £1,800.00 in cash at once; the rest is on credit.
Correct journal entry
Purchases £8,000.00, Input VAT £1,600.00 / Cash £1,800.00, Trade payables £7,800.00
Debit
Purchases£8,000.00
Input VAT£1,600.00
Credit
Cash£1,800.00
Trade payables£7,800.00
Why?
- Purchases: expense incurred → debit
- Input VAT: asset increases → debit
- Cash: asset decreases → credit
- Trade payables: liability increases → credit
Calculation
- VAT: 20% of £8,000.00 = £1,600.00
- Gross amount: £8,000.00 + £1,600.00 = £9,600.00
- On credit: £9,600.00 − £1,800.00 = £7,800.00
Typical mistake
Subtracting the cash payment from the net instead of the gross amount.
Your turn
Three problems on exactly this case, with different numbers. Amounts work with or without separators, e.g. 2,400.00 or 2400.
Transaction
We buy goods from Taylor & Sons for £4,800.00 plus 20% VAT. We pay £650.00 in cash at once; the rest is on credit.
Debit
Assets up · expenses · liabilities down
Total debit£0.00
Credit
Liabilities up · income · assets down
Total credit£0.00
Frequently asked questions
What is the journal entry for purchase partly in cash, partly on credit?
Example: Purchases £8,000.00, Input VAT £1,600.00 / Cash £1,800.00, Trade payables £7,800.00.
How do I recognise this case?
Part is paid at once and the rest later, so the credit side has two accounts that add up to the gross amount.
What is the typical mistake?
Subtracting the cash payment from the net instead of the gross amount.