Net Credit Purchases Formula

In order to find out Credit Purchases or Purchases on Account, Net Credit Purchases Formula is used which is shown below:

Net Credit Purchases = Credit Purchases - (Purchases Returns & Allowances + Purchases Discounts)

Here Purchases Returns and Purchases are Contra Expense Accounts for credit purchases account.

For Example, if Credit Purchases = Rs.300000, Purchases Returns = Rs. 30000 and Purchases Allowances = Rs. 10000, then by applying the Net Credit Purchases Formula, we have: 

Net Credit Purchases = 300000 - 30000 - 10000 = Rs. 260000

So, in this way, net credit purchases or total net credit purchases is calculated.

Note: Another name for Total Net Credit Purchases is "Total Net Payables" as it represents the total amount of goods purchased on account from accounts payables to whom the payment should be made within the specified time period.