Incomplete Records

Finding Purchases Using the Trade Payables Account

Why Use a Trade Payables Account?

When a business has credit purchases, the bank account only shows cash paid to suppliers — not total purchases. Reconstruct the trade payables control account to find total purchases.

The Control Account Layout

Trade Payables Account
Dr                                    Cr
Bank (cash paid to suppliers)  x    Bal b/d (opening payables)    x
Bal c/d (closing payables)     x    Credit purchases (missing)    x
                              ──                                   ──
                               x                                    x

Shortcut formula:

Credit purchases = Bank payments + Closing payables − Opening payables

If there are also cash purchases, add these to credit purchases to get total purchases.

Note on Other Entries

• Returns outwards → debit entry (reduces purchases)

Worked Example — Mikel Nibali (continued)

Bank account shows: payments to trade payables = £59 845 Additional info: opening payables £5 450; closing payables £6 540

W2 — Trade Payables (credit purchases):

Trade Payables
Dr                             Cr
Bank        59 845   Bal b/d    5 450
Bal c/d      6 540   Purchases 60 935
            ──────             ──────
            66 385             66 385

Formula: 59 845 + 6 540 − 5 450 = 60 935

Worked Example — Vincenzo Landa (year ended 31 March 2014)

Bank receipts from trade receivables = £68 500; opening receivables £6 250; closing receivables £7 500 W1 Revenue: 68 500 + 7 500 − 6 250 = 69 750

Bank payments to trade payables = £32 815; opening payables £1 945; closing payables £2 840 W2 Purchases: 32 815 + 2 840 − 1 945 = 33 710

Income statement extract: