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A purchase ledger, also known as accounts payable ledger, is a fundamental component of a company's accounting system that records all transactions related to purchases made on credit. It serves as a detailed record of the company's obligations to suppliers and vendors for goods and services purchased on credit terms.
The primary function of the purchase ledger is to track and manage the company's accounts payable (AP). Whenever a company makes a purchase on credit, an entry is recorded in the purchase ledger, detailing the supplier/vendor name, invoice number, invoice date, amount owed, payment terms, and due date. This information helps the company keep track of its outstanding liabilities and manage its cash flow effectively.
Key activities related to the purchase ledger include:
Recording Purchases: When goods or services are purchased on credit, the details are entered into the ledger.
Monitoring Payables: It allows businesses to monitor and manage their accounts payable balances, ensuring timely payments to suppliers to maintain good relationships.