Is there a difference between the accounts Purchases and Inventory?
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 won’t 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.
Learn more about Inventory & Cost of Goods Sold.
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9 Responses to “Is there a difference between the accounts Purchases and Inventory?”
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what is reconciliation statement
Yes.
Puchasess : is when cash account is Debited puchasess acount will be cridited.
Inventory : is the list of the items puchasessed
Reconciliation statement is the statement that reconciling two different document,it may be cash book with the bank statemet that is bank reconciliation statement
Purchases : movement of goods and cash or credit transaction. Consists of purchase on cash & credit, returns, etc. consits also of inventory and non inventory items
Inventory: goods that remains after a periodic transactions….
Yea.. Thanks for the info..
B4 this I’m quite confuse how to differentiate between purchase acc & inventory account bcoz what I learn in uni was just update purchase account..
So, they are not teaching about perpetual inventory system….
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I am applying for a bookkeeping job and needed to refresh my memory from 20 years ago taking accounting classes. This site with the queston and answers has really helped me feel confident that I can get and do the job.
Thanks Accounting Coach!
In the periodic method, when calculating the GIT at the end of the year do you also include in the purchases or only accrue the payable on B/S.
is this entry correct
Dr Inventory B/S (GIT)
Cr A/P
Dr. Purchases
Cr. Inventory (I/S)