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Learn Bookkeeping in 7 Days: Don't Fear the Tax Man by Rod Caldwell

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Day 5: The purchase and sale of inventory on credit terms

Key terms and concepts

Inventory: goods that we purchase for resale. It is the basis of our business and is not something used or consumed within our business itself.

Credit purchase and credit sale: a purchase or sale of inventory where settlement of the account occurs at a later time. The credit terms are usually stated on the invoice, for example, ‘Net 30 days’.

Accrual accounting: recording of all business transactions at the time that a legal obligation exists for you to pay or receive money, albeit sometime in the future. You ‘accrue’ or record the right within your accounting system.

‘Cash accounting’ principles: under cash accounting rules, credit purchases and credit ...

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