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Term: Accounting -> Credit purchase
Term:

Credit purchase

Definition:

The company buys inventory from another company (the supplier). The company does not pay cash at the time of purchase. The company promises to pay the cash later. The supplier extends an informal, temporary loan to the company. Usually the company pays the cash in one or two months. This transaction increases the asset Inventory and increases the liability Accounts Payable.

Related terms:

Return on sales

Perpetual inventory method
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