#Cogs income statement how to#

Get My Free Guide! Why is COGS important? Your COGS calculation would look like this: LetвЂ™s say your businessвЂ™s beginning inventory is $2,000 and you purchase $500 of supplies during the period. Follow the formula below to calculate your COGS:Д¬OGS = Beginning inventory + purchases during the period вЂ“ ending inventory Example of calculating COGS

#Cogs income statement how to#

Calculating COGSД«efore you can jump into learning about recording cost of goods sold journal entry, you need to know how to calculate COGS. If you donвЂ™t account for your cost of goods sold, your books and financial statements will be inaccurate. ThatвЂ™s where COGS accounting comes into play. ItвЂ™s important to know how to record COGS in your books to accurately calculate profits.

When is cost of goods sold recorded? You only record COGS at the end of an accounting period to show inventory sold. Simply put, COGS accounting is recording journal entries for cost of goods sold in your books. COGS is your beginning inventory plus purchases during the period, minus your ending inventory. But do you know how to record a cost of goods sold journal entry in your books? Get the 411 on how to record a COGS journal entry in your books (including a few how-to examples!).ДЄs a brief refresher, your COGS is how much it costs to produce your goods or services. As a business owner, you may know the definition of cost of goods sold (COGS).