Cost of Goods Sold :: essays research papers

A figure of be of goods exchange reflecting the woo of the product or good that a friendship sells to generate revenue, appearing on the income statement, as an expense. Also, referred to as follow of gross revenue. It is essentially a cost of doing business, much(prenominal) as the amount nonrecreational to purchase raw materials in order to manufacture them into finished goods. For example, if a $10 widget costs $6 to make, then the cost of goods sell is $6 per widget. That is, the cost of goods sold is equal to the beginning arsenal overconfident the cost of goods purchased during some period minus the ending take stock. However, the meaning of the cost of goods sold differs from one society to another company. There atomic number 18 leash types of companies such as switch, manufacturing, and service.The merchandising company such as retail stores and wholesalers sells goods that are usually same physical form as what the company acquires them. Therefore, those acq uisition cost would be the cost of goods sold in merchandising company. The acquisition cost includes not only the cost of acquiring the product but also the cost of making the goods ready for sale such as shipping costs. Lets think of the following smirch during the period. In addition to the beginning inventory, a company purchased additional merchandise so the amount of goods operable for sale became the beginning inventory prescribed additional purchased merchandise. At the end of the period, the company wants to determine the amount of the cost of goods sold and ending inventory. How do they determine the amount of the cost of goods sold and ending inventory? There are two types of approaches periodic inventory method and perpetual inventory method. The periodic inventory method is the following.(Cost of goods sold) = (Goods usable for sales) (Ending inventory)In the periodic inventory method, we determine the amount of ending inventory at the end of period, and then rec oup the ending inventory from the goods available for sale. On the other hand, the perpetual inventory method is the following.(Ending inventory) = (Goods available for sales) (Cost of goods sold)In the perpetual inventory method, we determine the amount of cost of goods sold, and then subtract the cost of goods sold from the goods available for sale. Therefore, we have to keep a evince for inventory constantly. Although this record keeping is burdensome for some company, there are important advantages.