6- What do you mean by purchase merchandise; assets or expense?
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Answer Posted / aqeel raza
All purchases unsold for doing business are assets for example a trader purchases items for sale and to get profit over it and a manufacturer purchases different materials to make goods of his business. All goods sold help to recover the amount of purchases as well as profit over it. Therefore, the purchases which were assets unsold when sold changed the name as sale.
Because of the reason in question, the purchase of merchandise is taken in expense and revenue ledger to make easy gross profit and the unsold merchandise will be the part of general ledger account or balance sheet accounts.
All purchase returns and purchase discounts which are contra assets but reduce purchases in income summary are temporary accounts may belong to expense and revenue ledger.
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