What is the cost of sales❓

What is the cost of sales❓

In this article, we will talk about Cost of production or Cost of good sold

Cost of sales is the cost used to obtain the goods. This cost of sales will be shown on the company's income statement. In calculating cost of sales, it can be classified into 2 cases as follows:

1.In the event that an establishment is a manufacturer of products for sale by itself Cost of sales is included with the cost of raw materials, labor, and expenses incurred directly from the production of the product.

2. In the event that the establishment does not produce the product itself but receives the product from other sources to sell it, the cost of sales in this case will be calculated from the cost price of the product from the source.

Formula for calculating cost of sales

Inventories at the beginning of the period + net purchases* (purchase products + shipping costs - return products - discounts) - Inventories at the end of the period

*Net purchase means Cost of goods paid by the company during that accounting period

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