| Cost Of Goods Sold |
Article Index for Cost Of |
Website Links For Cost |
Information AboutCost Of Goods Sold |
| CATEGORIES ABOUT COST OF GOODS SOLD | |
| generally accepted accounting principles | |
|
Subtracting the ''cost of goods sold'' from the amount billed when selling the good (''sales revenue'') produces the ''gross profit'' on the good. The ''net profit'', what most people understand as the business' Income or profit, is determined by subtracting the ''cost of goods sold'' and the ''indirect expenses'' from the ''sales revenue''. ACCOUNTING METHOD The Revenue from Merchandise sold must be matched with the COGS. Cost of sales or Cost of goods sold is the identification of the cost of those items sold in the most recent accounting period. It can be done by specific identification, taking inventory, or different methods using estimates such as the " Retail " method. COGS is also the determining factor in arriving at '' Gross Profit '' and is determined under the periodic method as follows:
To determine the Net Profit , one would then compute the indirect expenses such as office expenses, light, heat, etc. Determining the cost of goods sold is the first step in arriving at the net profit. If the COGS is too high, then the gross profit will not support the indirect expenses and the result will be a loss for the Accounting period. SEE ALSO EXTERNAL LINKS Further reading:
|
|
|