Explain the following terms: (a) Purchases (b) Stock.

(a) Purchases – The term purchases is used for the purchase of goods. Goods are the things which are purchased for resale as it is or after processing. Purchases may be in cash or on credit.

Total purchase = Cash purchase + Credit purchase

(b) Stock – The term stock includes the value of those goods which are lying unsold on a particular date. Stock lying unsold in the beginning of an accounting period is known as opening stock. Stock lying unsold at the end of an accounting period is known as closing stock.