How To Calculate Cash Purchases

When the goods purchased by the business to its suppliers by sending any Cash Payment, then Such Purchases are called Cash Purchases. For Example, if Mr. A Purchased Goods Worth Rs. 50000 From Mr. B (Supplier) and makes the payment on time, then this Business Transaction is called Cash Purchases and Mr. A records this purchases account in his book of accounts as an Cash Expense.

You Can Also Read Out “How To Calculate Cash Sales”

As, we know the Total Purchases include Cash And Credit Purchases, so we can write in the form of equation as shown below:

Total Purchases = Cash Purchases + Credit Purchases

Cash Purchases = Total Purchases - Credit Purchases

The information related to Cash Purchases is obtained from Statement of Cash Flows Under Cash From Operating Activities Section and it is added back to Net Income / Net Profit Obtained from Income Statement or Profit & Loss Account.