What is Cost of Good Sold?


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1 What is Cost of goods sold? Why is it important to understand the cost of goods sold?1.1 Cost of goods sold (Cost of goods sold) 1.1.1 Calculating the cost of goods sold is correct?

What is the cost of goods sold? Why is it important to understand cost of goods sold?

Cost of goods sold (Cost of goods sold)

Cost of goods sold in English called cost of business goods.

You are viewing: What is Cost of Good Sold?

Cost of goods sold (COGS) refers to the direct budget arising from the production of goods sold in a company. These resources include the budget of materials used to make the good along with the direct labor budget used to produce the product. Cost of goods sold does not include indirect costs, such as distribution budgets and sales force costs.

Cost of goods sold is also known as “cost of goods sold”.

Calculating cost of goods sold is correct?

The most straightforward general method for calculating COGS is:

Cost of goods sold = beginning inventory + P + ending inventory

In there:

P: Buy in period

However, when calculating the cost of goods sold in practice, this method has many improvements depending on the accounting method. Below are some common accounting methods to calculate cost of goods sold.

FIFO (First In First Out) method

This method is based on the first-in, first-out method, the orders that are entered first will be sold first with the export unit price equal to the import unit price. FIFO formula will often be added with expired items, or electronics, computers, phones, etc. Since these items cannot be kept for long in the warehouse, they need to be shipped early.

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Since commodity prices tend to grow over time, a business using the FIFO trick will sell its cheapest item first. COGS under the FIFO method is usually lower than the COGS recorded in LIFO. Therefore, net income using the FIFO method increases over time.

LIFO (Last In First Out) method

Contrary to FIFO, LIFO know-how is based on last-in-first-out, the items that are entered last will be sold first. This method is often applied to fashion items such as clothing and footwear, because these items are easy to become obsolete when in stock, so they need to be shipped first.

weighted average method

In this way, the average price of the total product in stock, regardless of the date of entry, will be used to value the item sold. This calculation helps to prevent the cost of goods sold status quo from being affected by large volumes of imports.

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This is also the most diverse cost of goods sold tip that advanced software has so far applied.

Source: internet

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