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why purchase account is treated as nominal account..purchase represent inflow of goods I.e increase in asset...purchase is not an expense for business ....it should be real account... please clarify..
Replies (17)
Purchase is expenses for business. It's other effect is increase of stock, but even it decreases money, other asset.
we debit purchases to pnl
expense always reduces net assets of business but purchase of goods never reduces net assets than how can we say that it is an expense
can u define what's nominal account
accounts related to expense and icome
expense reduces net assets and income increases net assets of business
Now tell me what's expense ?
if u have taken services from any person or benefit from any assets as a result of which net assets of business reduces than worth of that benefit shall be expense
An expense in accounting is the money spent or cost incurred in an entity's efforts to generate revenue.Expenses represent the cost of doing business where doing business is the sum total of the activities directed towards making a profit.
my definition is correct or incorrect and can u please explain this definition
I don't know what is the source of your definition, so no comment on it.
as per accounting expenses is something cost incurred to derive profit.
ok thanks for reply...
As purchase is incurred as a cost of goods, and we do it to make profits, so it's expense.
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