Learn to calculate cost of goods sold (COGS) - also known as cost of sales - and where it fits into the profit and loss statement.
This is the amount the business paid to buy the goods they are selling. To get the cost into the bookkeeping system the bookkeeper will need to
enter the details off the purchase invoice for the goods. The amount taken off the purchase invoice can be made up of the following:-
The price of the goods ~ less discount ~ plus freight = the cost.
These are items the business purchases to
sell to customers and they can encompass all sorts of descriptions like
stock, parts, products, equipment, retail goods, wholesale goods,
freight, sub-contractors - it all depends what the nature of the
business is, what they sell and how they want to name the items in the
Only the cost
price of the goods that are sold are included in the COGS account. Goods
that are inventoried, like stock, remain in the inventory account (an
asset account) until sold at which time they are journalled into the