Leaning Online

Ope ning or Begi nning Inventory plus Net Purchases is equal to the Cost of Goods Available for Sale as it is the cost of goods available for sale purposes and it does n't include damaged or destroyed goods. The remaining goods that are not sold during the accounting cycle are called closing inventory. B asically, cost of goods available for sale formula is the part of Cost of Goods Sold Or Cost of Sales formula that is shown below:                                                                       Rs. Opening Inventory                                       XXX Add: Purchases                                           XXX                                                                   _______ Cost of Goods Available for Sale                 XXX Less: Closing Inventory                               XXX                                                                    _______ Cost of Sales                 

The main or primary difference between Purchase Invoice and Sales Invoice is that purchase invoice is issued by the purchaser / buyer whereas the sales invoice is issued by the seller. Purchase invoice shows that goods / products or services which are purchased by the buyer from seller / supplier for an agreed amount on a particular date payable for a specified time period to the supplier while sales invoice indicates that Credit Sales has been made between seller and buyer for specified goods / products or services for an agreed price. A Purchase I nvoice is issued from buyer or purchaser to seller / supplier or vendor containing lists of prices, quantities of goods, etc while a Sales invoice , containing price lists. number of quantities ordered, etc, is issued by the supplier to customers informing him about the completion of the order according to the purchase invoice sent to him from buyer. Purchase invoice is the confirmation

Sales invoice is issued by the seller to the buyer informing him that Credit Sales has been made for the goods / products or services sold for an agreed price. It includes date of sale, particulars, price of items, quantities of items sold. It helps the sellers to keep record of daily credit sales and how much unpaid amount is “ Receivables ” from the customers.

Purchase Invoice is an evidence document issued  by a buyer or a purchaser and it is presented to a buyer by a seller asking for the payment of goods / products or services purchased by the buyer from seller or supplier for a agreed price. It is necessary to keep records of Credit Purchases and how much is payable to Accounts Payable or supplier of the business.

Money in Accounting is an Asset if it is owned and controlled by the enterprise and provide probable future economic benefits to the business. It is found in the form of gold, metal, currencies, e-currencies, cheques /checks and other medium of exchange. The most widely used form of money used in accounting is Currency that is found in the form of  Cash in the world of accounting and that may be in Hand or at B ank. Cash in Hand is called Cash Account while Cash At bank is called bank account. Cash in Hand &  B ank just shows you a position of cash either in the possession of a company’cashier or in the bank account of company opened in a bank.

Yes, land is classified under Fixed Assets but it doesn’t need any sort of Depreciation as it is situated as free a natural resource of God (Allah) which is never finished that is why it is not considered as a Depreciating Asset . A Land has long life, so it has Useful Life of many years till the end of this universe.

An invoice is an evidence document that expressed the agreement made between seller and buyer for the goods or services sold or purchased with specified quantity and price mentioned with the date, names of the parties. So, it shows an evidence of a Business Transaction . There are different types of invoice such as Purchase Invoice, Sales Invoice, etc.  Most of the time, an invoice is made for Credit Purchases and Credit Sales . Invoice is the first step of accounting cycle which is very important in the Books of Accounts of a business. Now a days, due to the use of i nternet, the trends of onli n e buying and selling are increasing and hence electronic invoice is used to keep records of  Sales and Purchases made between sellers and buyers.

Credit Purchases means purchased goods, services or supplies on credit or account from suppliers without making any cash payments immediately whereas Cash Purchases means purchased goods, services or supplies from suppliers for Cash . Credit Purchases works under Accrual Basis of Accounting while Cash Purchases operates under Cash  B asis of Accounting . Similarities Between Credit Purchases And Cash Purchases In Accounting  1.  Both are the parts of Total Purchases 2.  Both are the Direct Expenses incurred for the purpose of earning Revenues for the business.

Credit Purchases Turnover Ratio is the ratio that shows how much a company purchased goods on credit or account from its suppliers and to pay them within the accounting cycle. It is also known as Accounts Payable Turnover Ratio / Creditors Turnover Ratio . Mathematically, we can show it as shown below: Credit Purchases Turnover Ratio = N et Credit Purchases / Average Accounts Payable   If this ratio is good, then it means that the company pay its bills to suppliers quickly and in time. However, it totally depends upon the particular type of industry in which a company is operating its business.

Paid cash on accou nt or for Cash arises when we make payments to or receive cash payments from either customers, suppliers or company to whom we receive services such as rent facilities, transportation services, etc. When Cash Paid On Account In that case, we create either Current Assets or Fixed Assets . For example, if we paid advances to customers or Paid Rent In Advance within a period of one year, then it creates current assets and if we paid for a period of more than one year then it creates fixed assets. The Journal Entry to record is as follows:                                           Prepaid Expenses a/c  XXX                                                                             Cash a/c  XXX                                                            (Paid Expenses In Advance) When Paid Cash For Cash (i) When we paid cash to suppliers for goods purchased for cash. The accounting journal entry is as:  

Purchases included both Cash Purchases and Credit Purchases . So, it is the sum of cash purchases and credit purchases. Mathematically, we can show as below: Purchases = Cash Purchases + Credit Purchases The purchases is also called Total Purchases  that is a wider term which includes both types of purchases. There is another way to calculate purchases. That is Cost of Sales Formula as shown below:                         Cost Of Sales = B egi nning Inventory + Purchases - Ending Inventory                         Purchases = Cost of Sales - B egi nning Inventory + Ending Inventory How to Calculate Purchases Without Beginning Inventory You ca n calculate purchases without beginning or opening inventory if average inventory is given. We know that Average Inventory Formula is as:                               Average Inventory = B eginning Inventory + Ending Inventory / 2 Let’s us consider an example