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Purchases, Sales and Inventory

Purchases and sales, returns, revenue from operations, goods, stock and inventory types including opening stock, closing stock, raw materials, work-in-progress with valuation methods.

Notes

Purchases, Sales and Inventory

Class 11 Accountancy — Accounting Terminology

Purchases and Purchases Return

Purchases
Purchase of goods to be sold or for manufacture of goods.

This term includes both cash purchases and credit purchases of goods.

Purchases Return
Return of goods purchased.

Also known as Returns Outward. Goods that were purchased may be returned to the seller for various reasons (e.g., being defective).

Sales and Sales Return

Sales
Sale of goods.

This term encompasses both cash sales and credit sales.

Sales Return
Return of goods sold.

Also known as Returns Inward. When goods that have been sold are returned by the purchaser.

Revenue from Operations and Goods

Revenue from Operations
Amount received or receivable from sale of goods and/or services or both.

Revenue from Operations signifies the revenue earned by an enterprise from its primary operating or business activities. It is calculated net of sales returns.

Examples: Net sale of goods, Sale of services (for non-financial enterprises), Interest earned (for financial enterprises).

Revenue from Operations = Sales − Sales Return
Goods
Goods purchased for resale or for manufacturing product.

Goods are the physical items of trade that are purchased or manufactured with the intention of being sold. They are the Stock-in-Trade of an enterprise, acquired or produced for selling.

For a business dealing in home appliances, items like TVs, fridges, and ACs are goods. For a stationer, stationery items are goods.

Stock / Inventory

Stock / Inventory
Goods remaining unsold or unused in manufacturing of product as on a particular date.

Stock (Inventory) is a current asset held by an enterprise either for sale in the ordinary course of business or for use in the production of goods meant for sale.

  • Opening Stock — stock-in-hand at the beginning of the accounting year
  • Closing Stock — stock-in-hand at the end of the current accounting period