Difference Between Purchases And Expenses In Accounting
Purchases are goods or merchandise purchased for cash or o n credit or on account while Expenses are incurred for the purpose of earning Revenues for the business. There are two types of purchases i.e., Cash Purchases and Credit Purchases while two main types of expenses are Direct Expenses and Indirect Expenses. Expenses are recorded in Income Statement in order to find out Cost of Sales as it is a part of Direct Expenses while only direct expenses are the parts of cost of production and recorded under the section of Cost of Sales in Income Statement or Trading Account but indirect expenses are recorded in Income Statement or Profit & Loss Account as these are not directly related to the cost of production. So, the expe nses recorded in Income Statement are categorized as Operating Expenses, Marketing & Selling Expenses Administrative Expenses and Other Expenses. So, purchases are recorded either in Trading Account or Income State...