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Definition

<p style="text-align: justify;">In <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">financial accounts</span>, that part of the ledger where the <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">company</span>'s purchases of goods are recorded. Purchases of <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">assets</span> like consumables, are treated as an <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">expense</span>, long-term assets in which case they are <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">depreciated</span> over their useful lives or <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">stock</span> which can be <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">raw materials</span>, <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">work-in-progress</span> or <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">finished goods</span>. The calculation of <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">cost of sales</span> (which is a variable cost) is <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">opening stock</span>, plus purchases less <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">closing stock</span>. Purchases are first recorded in the purchases journal and then posted out of that to the appropriate account.</p>