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Purchases are the cost of inventory during a period for sale in ordinary course of business. Purchases may includes buying of raw materials in case of manufacturing concern or finished goods in case of retail business. in Accounting purchases like procurement of fixed assets which is shown in assets side of balance sheet which shows how strong the balance is.
Purchase is the cost of buying inventory during a period for the purpose of sale in the ordinary course of the business. It is therefore a kind of expense and is hence included in the income statement within the cost of goods sold. Purchases may include buying of raw materials in the case of a manufacturing concern or finished goods in the case of a retail business.
However, in accounting, we have to differentiate between purchases as explained above and other purchases such as those involving the procurement of a fixed assets (e.g. factory machine or building). Such purchases are capitalized in the statement of financial position of the entity (i.e. recognized as assets of the entity) rather than being expensed in the income statement.
- See more at: http://accounting-simplified.com/accounting-for-purchases.html#sthash.hG2t37zT.dpuf
In Company , To Manufacture the Product , we Define Purchase in Three parts
1 Purchase Raw Material
2 Purchase Packing Material
3 Purchase Consumable
If u Purchase Some Mechinery the we Define Purchase as a
Purchase Capital Goods or Purchase Fixed Assets.
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