The term purchases is used for buying of goods for resale or for use in manufacturing process. The term purchases includes both Cash and Credit purchase of goods.
If the benefit of an expenditure is exhausted within a year it is called expense whereas excess of expenses of a period over its related revenues is termed as loss.
When discount is allowed by a seller to its customers at a fixed percentage on the list or catalogue price of the goods it is called trade discount. It is not recorded in the books of accounts.
Godrej Ltd. imported from Germany one machinery for sale in India and another machinery for production purpose. Will you treat them goods or fixed assets?
Answer
First machinery will be treated as goods, and second machinery will be treated as Fixed Asset.
Mr. Jaspal Singh dealing in electronic goods sold 20 TV sets costing ₹ 30,000 each at 40,000 each. Out of this ₹ 5,00,000 were received in cash and the balance is not yet received. State the amount of revenue.
Answer
Revenue will be ₹ 8,00,000 (i.e. 20 TV Sets x ₹ 340,000) Revenue is the amount either received or receivable from sale of goods and services. Both cash sales and credit sales are included in revenue.