Purchasing things for your company (i.e. materials, supplies or services) creates two types of entries within your company’s accounting – a reflection of what was bought (e.g. you increase your inventories or expenses) and a reflection of what you used to make the purchase. That is, you’re either going to pay for it later and hence you recognized a payable or you paid on spot and you simply recognize a credit entry onto your respective cash account. 

Purchasing and payables go hand in hand since either you’re going to pay or you already paid, the fact is that for something you acquired you have to give up resources and that’s you paying.

Purchasing is a routine part of everyday business and as such it’s important to understand entries made in relation to it. There are various means one can pay to its suppliers – pay on spot, at a later date make payment based on the invoice received, finance the purchase with a finance lease and so on (including cheques).

No matter the means however, with double-entry accounting there’s always two sides to a purchase. It’s not just what you gained but also what you gave up.