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(21)-CALCULATING COST OF GOODS SOLD

Saturday, November 7, 2009

Calculating Cost of Goods Sold

Opening stock value -------------------------------------XXX
(+)Cost of Purchase or cost of production -----XXX
(-) Closing stock value -----------------------------------(XX)
Cost of Goods Sold ---------------------------------------XXX


Goods might be unsold at the end of an accounting period and so still be held in stock at the end of the period. The purchase cost or production cost of these goods should not be included therefore in the cost of sales of the period, that’s why we doing stock adjustment like above.

Goods written off or written down

A business might be unable to sell all the goods of purchase or produced, because might be happen to the goods before they sold,
  • Goods might be damaged.
  • Goods might be stolen.
  • Goods might become obsolete or out of fashion.

In the causes like that we should remove that cost from cost of goods sold,

Opening stock value --------------------------------XXX
(+)Cost of Purchase or cost of production ---XXX
(-) Damaged stocks -------------------------------(XX)
(-) Stolen stock -------------------------------------(XX)

(-) Closing stock value -----------------------------(XX)
Cost of Goods Sold --------------------------------XXX

Also we should write off that cost in the profit and loss account.

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