Purchases refer to the quantity of merchandise bought by a business for resale or for utilize in the production. Purchase means to acquire ownership of a security or further asset in exchange for cash or worth. Goods purchased for money are called cash purchases. If it is purchased on credit, it is called as credit purchases. Total purchases include both cash and credit purchases.
Purchases can be made in cash or credit. Both usually shift ownership when the transaction is initiated even though the latter doesn’t pay cash for good or service until some date in the future. It is the expenditure of buying inventory during a stage for the reason of sale in the usual path of the business.
The most important objectives of purchasing are to
(1) Uphold the eminence and worth of a company’s products,
(2) Reduce cash tied-up in inventory,
(3) Sustain the flow of inputs to keep the flow of outputs, and
(4) Make stronger the organization’s viable place.