How do you calculate net purchases?
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Q:

How do you calculate net purchases?

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Quick Answer

To calculate net purchases, add all purchases and freight-in, or shipping, together to get gross purchases and then subtract purchase discounts, purchase returns and allowances from gross purchases. This process yields the net purchase total, according to Simplestudies.

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Full Answer

Net means the exclusion of something in a total, notes PakAccountants.com. In the case of purchases, discounts, returns and allowances are excluded. In other words, the net purchase is the total of everything a person or business bought and how much the person or business paid for shipping the merchandise. Then, subtract from that total any money returned because a purchase was returned; any purchase discounts provided for any reason, such as early or on-time payment; and any purchase allowance or reduction in the buyer's cost of merchandise.

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