A company’s beginning inventory and purchases are typically referred to jointly as the cost of goods available for sale. Similarly, consumed inventory costs are typically referred to as cost of goods sold. The cost of goods available for sale is equal to beginning inventory plus purchases. The cost of goods sold is equal to the cost of goods available for sale less ending inventory. Gross profit is equal to net sales less the cost of goods sold.
The calculations shown above are typically included on the income statement for a merchandising company. Cost of goods sold is subtracted from net sales in order to find gross profit.
- Business
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- Accounting
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- Financial Accounting & Bookkeeping
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- Purchases, Inventory and Cost of Goods Sold (COGS)
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Cost of Goods Sold
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Cost, contribution and profit analysis
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