why is buying trading-stock from cash not regarded as an expense?

First of all I understand that bank money is an asset and so is trading-stock, but why is buying trading-stock not regarded as an expense to the business?

One thought on “why is buying trading-stock from cash not regarded as an expense?

  1. Aganju

    Because the stock still has the same value as the money paid for it – you are just exchanging one asset for another (of course the stock value starts to change immediately, but for the accounting the fictional value is the buying price).

    For the accounting, it is similar to changing a 100$ bill in five 20$ bills – same value, still assets.

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