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    Purchases, Inventory and Cost of Goods Sold (COGS)

    Purchases, inventory and cost of goods sold are intimately related in accounting. At the end of the period, manufacturing companies and merchandise retailers present these three items together on the income statement. Cost of goods avaialble for sale are calculated as the company's beginning inventory plus it's purchases. Cost of goods sold are calculated as the cost of goods avalailable for sale less ending inventory. Gross profit is calculated as sales less cost of goods sold. 

    Operating expenses, suches as selling, general and administrative (SG&A) are then subtracted from gross profit to calculate operating income. Service companies may use a similar layout for their income statement, recording costs of services and calculating a gross profit. This allows users of the financial statement to get a quick understanding of the inventontory consumed in the ordinary course of business and to compare it to the company's overhead. 

    When a periodic inventory system is used, the cost of goods sold depends significantly on the cost flow method chosen for valuing inventory and cost of goods sold. Because inventory amounts may be susceptible to maniupulation, the accounting professions is acutely aware of the need to ensure true and fair accounting methods and satisfactory internal controls are used for inventory. 

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    BrainMass Categories within Purchases, Inventory and Cost of Goods Sold (COGS)

    Cost of Goods Sold

    Solutions: 81

    The cost of goods sold is the cost of inventory consumed or sold over the ordinary course of business during the period.


    Solutions: 1

    Purchases are equal to the price of purchased inventory multiplied by the number of units ordered. The purchases account informs the cost of goods available for sale.

    BrainMass Solutions Available for Instant Download

    Ending Inventory, COGS and Net Income Under the FIFO Method

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    Savannah Textiles Company: WIP Inventory

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    Assessing Budgets

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    Peabody Limited. Statement of Cost of Goods Manufactured, COGS, Fin Stmt

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    PharmCo's Overstated Inventories

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    Park Company Exercise (Four Inventory Methods)

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    Fixed Order Quantity Inventory Model

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    Inventory-Rose Arena

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    Intermediate Financial Accounting - Inventories

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    Preparation of a Schedule of COGM and COGS and more....

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    Statement of Cost of Goods Manufactured (COGM) vs COGS

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    Dave Corporation's Spending Variance for Supplies Cost

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    Quantitative Analysis of Inventory Control Models

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    Compute the cost of goods manufactured and COGS

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    Cost Flow Methods

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    Cost Formula

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