Cost of Goods

In: Other Topics

Submitted By fagita15
Words 352
Pages 2
XACC/290
October 18, 2013

Cost of Goods
This paper will discuss the cost of goods. It will discuss how to calculate and the items involved with the cost of goods. The primary source of revenue with merchandising Operation Company’s like Wal-Mart is sales (Kimmel, 2011).
Cost of Goods Sold
According to Kimmel (2011) the cost of goods “is the total cost of merchandise sold during the period” (p. 228). The way to calculate cost of goods sold is the beginning Inventory plus Inventory Purchases minus End Inventory equals Cost of Goods Sold (Kimmel, 2011). An example of calculating cost of goods; Donna has a business that sells dolls on eBay. The inventory count at the beginning of January shows that she has $500 worth of inventory on hand. Over the month, she purchases another $2,000 worth of dolls. Her inventory count at the end of January shows that she has $500 of inventory on hand. When using this equation, Donna’s cost of goods sold for January is $2000, this is how you calculate it:
Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold 500 + 2,000 - 500 = 2,000
Make Up of Cost of Goods Sold
The items used that make up cost of goods sold will start with the purchase of the items, the cost of bringing good to point of sale, and the value of the goods in stock at the beginning of a specific period (Kimmel, 2011).
Conclusion
Companies will use a specific inventory system that fits their scenario to maintain an accurate account of the product sold. According to Kimmel (2011) there are two main inventory systems currently used, perpetual and periodic system (p. 230). A perpetual inventory system will give a company maintained detailed records of the cost of each inventory purchase and sale, while the periodic inventory system does not keep detailed inventory records of goods on hand throughout the period (Kimmel, 2011,…...

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