In Accounting, purchases do not mean buying anything but it has special meaning. When saleable goods or merchandise are bought in a business these are called purchases. Purchases are of the following two types:
Types of Purchases
In Accounting, purchases do not mean buying anything but it has special meaning. When saleable goods or merchandise are bought in a business these are called purchases.
Purchases are of the following two types:
A purchase is an acquisition of goods or services, while an expense is an amount spent for these goods or services.
Generally, the double-entry accounting system should be used to track purchases, as it allows you to keep accurate records of your financial transactions.
Purchases are recorded in two accounts on a company’s books—an asset account (such as Accounts Payable) and either a revenue or an expense account (depending on what was purchased).
When purchasing credit, the amount is recorded in an asset account (such as Accounts Payable) and the vendor’s invoice will be used to track the debt until it is paid off.
Returns should be accounted for by debiting the expense or revenue accounts and crediting the asset account that was previously credited when recording the initial purchase. Additionally, any refunds due should be recorded in cash, if applicable.
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