Cost of Goods Checkpoint Essay

A multi-step income report for a trading business highlights the fact that between 40% and 60% of revenue from sales is accounted for as the cost of goods sold. The cost of goods attributed to a telephoners results is expensed as the company sells these goods. There are several ways to calculate COGS but one of the more basic ways is to get started with the beginning farm animal for the period and add the total amount of purchases make during the period then deducting the ending inventory.(According to Kimmel, Weygandt, and Kieso), cost of goods sold is found by taking the cost of goods available for sale (beginning switch inventory + dinero purchase), less the ending merchandise inventory (p. 244). In a wholesale or retail trading business, merchandise held for resale in the normal contour of business is the largest asset owned by the organization. For this reason it is vital that finished up-to-date records be maintained when goods are acquired and inventories taken. Fin ished goods and or merchandise makes up cost of goods sold.There are two classifications of inventory merchant or manufacturer. In a merchandiser company inventory consists of galore(postnominal) items all different. Whereas, a manufacturer, some inventory may not be ready (Kimmel, Weygandt, & international ampere Kieso, p. 282). Examples of items that make up cost of goods include produce, clothing, electronics, items that stern be resold from manufacture to a company to the customer. This means when the business acquires a finished product, the cost of the product goes into an inventory asset account.The customer lead then purchase the product, finished good, the business transfers the cost of the product from the inventory asset account to the cost of goods sold expense account because the product is no longer in the businesss inventory (Kimmel, Weygandt, & Kieso, p. 282). References Kimmel, P. D. , Weygandt, J. J. , & Kieso, D. E. (2011). Financial accounting Tools for business decision making (6th ed. ). Retrieved from The University of genus Phoenix eBook Collection database