Purchase transaction

Definition

A purchase transaction is the process through which a business acquires goods or services from a supplier. It typically involves an exchange of money for the purchased items and may include documentation such as invoices and receipts.

5 Must Know Facts For Your Next Test

1. Purchase transactions in merchandising involve acquiring inventory, which will later be sold to customers.
2. The primary accounts affected by purchase transactions are Inventory, Accounts Payable, and Cash or Bank accounts.
3. In a perpetual inventory system, each purchase transaction updates the inventory records immediately.
4. Purchase discounts can be offered by suppliers for early payment, impacting the total cost of inventory.
5. Freight-in costs associated with purchasing goods are included in the Inventory account under the perpetual inventory system.

Review Questions

Related terms

Inventory:

Goods and materials that a business holds for the purpose of resale.

Accounts Payable:

Amounts a company owes to suppliers for items or services purchased on credit.

Purchase Discount: A reduction in price offered by suppliers for early payment of invoices.