UK Accounting Glossary
A business entity takes delivery of goods or services and is allowed to make payment at a later date.
To purchase something with the promise that you will pay in the future.
When buying something on credit, you acquire the item immediately, but you pay for it at a later date.
Another name for credit purchases is to purchase something on account.
Credit Purchases in Accounting
When goods or services are bought by a business on account or on credit for reselling later, we can then say that Credit Purchases have taken place in accounting. As with purchases, credit purchases can be used to by goods and services however these are on credit or on the account.
Due to the credit purchase, an account receivable and an account payable are then created. The account payable is the current liability for the buyer, and they will pay the supplier at an agreed later date. The buyer should record it as a Credit Purchase.
From the viewpoint of the supplier, they should record it as an account receivable, it will be considered a current asset (for HMRC purposes they consider accounts receivable a current asset as if it has already been paid), and it should be recorded in Accounts Receivable Subsidiary Ledger.
That section provides a detailed analysis of the process that market participants must undertake to enter into a Credit purchase or sales contract with Microsoft.
Payable is a liability that requires the purchaser to make a future payment on credit purchase.
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
Definitions for Credit Purchase are sourced/syndicated and enhanced from:
This glossary post was last updated: 23rd December 2018.