Purchase costs were $728,000 while net purchases were $620,000. Companies incur more costs when they buy goods to resell or manufacture. Additionally, these costs raise the purchase costs that are shown on the income statement. There are, however, a number of things that could cause this sum to go down.
Companies are required by accounting standards to include these items in the income statement. As reductions from gross purchases, these disclosures are considered net purchases. Net buy is the total sum of a company's purchases less any deductions made for certain items. The net cost of goods obtained is the cost of products purchased.
In the computation, freight is added to the initial purchase price before purchase allowances, discounts, and returns are subtracted. Using this information, one can then multiply the price at which products will be offered for sale by a markup %.
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