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The account Purchases is generally associated with the purchase of inventory items under the periodic inventory system. Under the periodic system the account Inventory is dormant until it is adjusted to the cost of the ending inventory at the end of an accounting period.Under the perpetual inventory system, the account Purchases will not exist. Rather, the cost of inventory items purchased will be recorded directly into the account Inventory.Under the periodic system, the cost in the account Purchases will be added to the cost of the beginning inventory to arrive at the cost of goods available. The cost of the ending inventory is computed through a physical count (or an estimate) and is subtracted from the cost of goods available. The resulting amount is the cost of goods sold.Under the perpetual system, the balance in the account Inventory should be the cost of the ending inventory. Under the perpetual system, the cost of goods sold will have been removed from the account Inventory when the items were sold and placed in the account Cost of Goods Sold.
Both of them are accounts used to report inventories . Inventory account used under perpetual Inventory system and we report on it all Inventory related transactions . while purchases used under periodic Inventory system, and we report on it only the purchase transactions
The use of the Purchases and Inventory accounts depend on the type of inventory system the company is using.
If a company adopts a perpetual inventory system, goods bought by the company which are identified as inventoriable will be recorded to the Inventory account. Each time the inventoriable goods increased or decreased as a result buying or selling goods, Inventory account is used.
Meanwhile, if a company adopts a periodic inventory system, goods bought by the company which are identified as inventoriable are recorded to Purchases account.
Account purchases: Is a account revenu expenses during the financial period
In the case of
Non-sale purchases transformed into account current asset " inventory "
Sale purchases turn into an income account
purchase is to get the material in and the inventory management start after get the things purchased
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