How To Calculate Purchases Or Inventory Purchases In Accounting
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.
Cost Of Sales = Beginning Inventory + Purchases - Ending Inventory
Purchases = Cost of Sales - Beginning Inventory + Ending Inventory
How to Calculate Purchases Without Beginning Inventory
You can calculate purchases without beginning or opening inventory if average inventory is given. We know that Average Inventory Formula
is as:
Average Inventory = Beginning Inventory + Ending Inventory / 2
Let’s us consider an example in order to understand this question.
Example: If ending Inventory is Rs. 3000 and Average Inventory is Rs. 4000 , Cost of Sales = Rs. 13000, then calculate purchases
We know that Purchases Formula:
Purchases = Cost of Sales - Beginning Inventory + Ending Inventory
Purchases = 13000 - (5000 + 3000)
Purchases = Rs. 5000
By applying the above formula of average inventory, the Opening Inventory = 2 X 4000 - 3000 = Rs. 5000
How To Calculate Purchases Without Ending Inventory
Similarly, you can also find out the value of purchases if ending inventory is not given. Let’s us take another example, where
opening inventory is Rs. 8000 and average inventory is Rs. 7000, Cost of Sales is Rs. 25000, then find out the value of purchases during the accounting period.
We know that:
Purchases = Cost of Sales - (Beginning Inventory + ending inventory)
Purchases = 25000 - (8000 + 6000)
Purchases = 25000 - 14000 = Rs. 11000
Average Inventory = Opening Inventory + Ending Inventory / 2
(2 X Average Inventory) - Opening Inventory = Ending Inventory
(2 X 7000) - 8000 = Ending Inventory
Ending Inventory = Rs. 6000
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