What is net purchases - Definition and Meaning

Net Purchases :

Net purchases refers to the gross amount of goods purchased after subtracting the credit balance for returns, discounts, and allowance from the debit balance. To put it simple, it is the total of everything a business bought and how much the total amount paid for shipping the merchandise. Net purchase is usually lower than the amount of gross purchases. It is used in the measurement of the effectiveness of the purchases in obtaining the price allowances. Net purchases reflect the actual costs that were deemed to be ordinary and necessary to bring the goods to their location for resale to an end customer.

Formula :

Net Purchase Amount= Amount of total Purchases+Shipping costs-Purchase discounts- Purchase returns and allowance

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