Cost of goods sold
Cost of goods sold (COGS) refers to the inventory岩羚羊 costs of tho goods a business has sold during a particular period. Costs are associated with particular goods using one of veral formulas, including specific identification, first-in first-out (FIFO), or average cost. Costs include all costs of purcha, costs of conversion and other costs incurred in bringing the inventories to their prent location and condition. Costs of goods made by the business include material, labor, and allocated overhead. The costs of tho goods not yet sold are deferred as costs of inventory until the inventory is sold or written down in value.
hdd是什么意思Contents 马丁路德金纪念日∙ mj是什么的缩写1 Overview ∙ 2 Importance of inventories ∙ 3 Cost of goods for resale ∙ 4 Cost of goods made by the business ∙ 5 Identification conventions ∙ afti6 Example ∙ 7 Write-downs and allowances ∙ 8 Alternative views ∙ 9 See also ∙ 10 Further reading ∙ 11 References |
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[edit] Overview
Many business ll goods that they have bought or produced. When the goods are bought or produced, the costs associated with such goods are capitalized as part of inventory (or stock) of goods.[1] The costs are treated as an expen in the period the business recognizes income from sale of the goods.[2]
Determining costs requires keeping records of goods or materials purchad and any discounts on such purcha. In addition, if the goods are modified,[3] the business must determine the costs incurred in modifying the goods. Such modification costs include labor, supplies or additional material, supervision, quality control, u of equipment, and other overhead costs. Principles for determining costs may be easily stated, but application in practice is often difficult due to a variety of consideration in the allocation of costs.[4]
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Cost of goods sold may also reflect adjustments. Among the potential adjustments are de
cline in value of the goods (i.e., lower market value than cost), obsolescence, damage, etc.
When multiple goods are bought or made, it may be necessary to identify which costs relate to which particular goods sold. This may be done using an identification convention, such as specific identification of the goods, first-in-first-out (FIFO), or average cost. Alternative systems may be ud in some countries, such as last-in-first-out (LIFO), gross profit method, retail method, or combinations of the.
Cost of goods sold may be the same or different for accounting and tax purpos, depending on the rules of the particular jurisdiction.
[edit] Importance of inventories
九月的英文缩写Inventories have a significant effect on profits. A business that makes or buys goods to ll must keep track of inventories of goods under all accounting and income tax rules. An example illustrates why. Fred buys auto parts and rells them. In 2008, Fred buys $1
ailment00 worth of parts. He lls parts for $80 that he bought for $30, and has $70 worth of parts left. In 2009, he lls the remainder of the parts for $180. If he keeps track of inventory, his profit in 2008 is $50, and his profit in 2009 is $110, or $160 in total. If he deducted all the costs in 2008, he would have a loss of $20 in 2008 and a profit of $180 in 2009. The total is the same, but the timing is much different. All countries' accounting and income tax rules (if the country has an income tax) require the u of inventories for all business that regularly ll goods they have made or bought.
[edit] Cost of goods for resale
Cost of goods purchad for resale includes purcha price as well as all other costs of acquisitions.[5] This cost should reflect any discounts. Additional costs may include freight paid to acquire the goods, customs duties, sales or u taxes not recoverable paid on materials ud, and fees paid for acquisition. For financial reporting purpos such period costs as purchasing department, warehou, and other operating expens are usually not treated as part of inventory or cost of goods sold. For U.S. income tax purpos
es, some of the period costs must be capitalized as part of inventory.[6] Costs of lling, packing, and shipping goods to customers are treated as operating expens related to the sale. Both International and U.S. accounting standards require that certain abnormal costs, such as tho associated with idle capacity, must be treated as expens rather than part of inventory.
Value added tax is generally not treated as part of cost of goods sold if it may be ud as an input credit or otherwi recoverable from the taxing authority.[7]
[edit] Cost of goods made by the business
The cost of goods produced in the business should include all costs of production.[8] The key components of cost generally include:
∙ Parts, raw materials and supplies ud,
∙ Labor, including associated costs such as payroll taxes and benefits, and
∙ Overhead of the business allocable to production.
Most business make more than one of a particular item. Thus, costs are incurred for multiple items rather than a particular item sold. Determining how much of each of the components to allocate to particular goods requires either tracking the particular costs or making some allocations of costs. Parts and raw materials are often tracked to particular ts (e.g., batches or production runs) of goods, then allocated to each item.
