Purchases Formula Accounting is a form of financial accounting that looks at how much money was spent on purchasing inventory and subsequent production costs. It involves setting up an income statement that details all purchases, labour costs and overhead expenses related to the acquisition of materials for production. It seeks to provide insight into the performance of the overall business by focusing on the cost associated with acquiring inventory and manufacturing items. With the help of Purchases Formula Accounting, businesses can make informed decisions about what level of inventory they should maintain and what kind of investments are necessary to ensure their long-term success.