How Do You Calculate Net Purchases?
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.
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.
