Difference Between Purchases And Direct Expenses

Goods Purchased are called Purchases in Accounting while Direct Expenses are incurred to make us possible to make purchases i.e., we paid Wages Expense in order to carry out the products or goods to desired destination such as godown or warehouse of the business. Other examples include Transportation Expenses, import duty, octori duty etc. So, these Expenses are also added to the cost of production with the purchases as these are incurred to earn direct revenues for the business from main or primary source of Revenues.

Purchases is added to Opening Inventory while direct expenses are added to the purchases in order to calculate Cost of Goods Sold or Cost of Sales for the accounting period.