Topic: How does the Purchases / C.O.G.S works?
I'm a little confused behind the logic of how the GL for the purchases account works. Usually this account is recorded in concurrent with when a PO invoice... With a credit going to accounts payable and debits going to the Inventory for the amount set out on the PO. But what about Purchases account? Should this account not also be debitted with the same amount going into inventory as well? Reason is, when we do a balance sheet to be able to calculate the the C.O.G.S wouldn't we need the exact purchases expense of what is currently purchased within the year?
How does the Purchases (C.O.G.S) account relate to the dispatching of a SO? Shouldn't it just be a straight Credit to the inventory and debit to the sales account and not have to touch the Purchases Account? Since this was already delt with when a PO invoice was created for the purchase in the first place?
Do I make any sense at all?