What goes in the Purchases account, and what does not
Purchases is only for goods bought to sell. See where every other cost goes, and what a cost in the wrong account does to gross profit.
Task 1Goods bought to sell2 questions
The Purchases account holds one thing: the cost of goods bought to sell on, or to make into goods to sell.
Everything else the business buys has its own account. A running cost is an expense with its own name, such as Stationery or Cleaning. Something kept and used for years is an asset, such as Shop fittings.
Holt Hardware is a hardware shop owned by Sam Holt. Nadia keeps its books.
Task 2Posting to the right account3 questions
You work out a figure, post entries to T-accounts and find the mistake in a table.
Task 3Why it matters3 questions
You work out a figure and pick the right answer.