cost of goods available for sale is a step in the calculation of goods sold of:
a merchandising company and a manufacturing company
Cost of goods available for sale is a critical step in the calculation of goods sold for a business. This figure represents the total cost of inventory that was available for sale within a specific accounting period. The cost of goods available for sale is calculated by adding the beginning inventory and the net purchases for the period.
Beginning inventory refers to the cost of inventory that the business had in stock at the beginning of the accounting period. Net purchases, on the other hand, refers to the total cost of inventory that was purchased during the accounting period, less any purchase returns and allowances, and purchase discounts.
Once the cost of goods available for sale has been calculated, it is then used to calculate cost of goods sold by subtracting the ending inventory from it. Ending inventory refers to the value of inventory that the business has on hand at the end of the accounting period. The cost of goods sold is an important figure, as it is used in the calculation of gross profit, which represents the difference between sales revenue and cost of goods sold.
By keeping track of the cost of goods available for sale, a business can make better pricing and inventory management decisions. It ensures that the costs of goods sold are accurately reflected in the business’s financial statements, which is essential for decision-making and profitability.
More Answers:
Understanding Debit: The Role and Significance of Debit in Accounting and Finance.Exploring the Benefits of Credit Unions: A Member-Focused and Community-Oriented Banking Experience
Mastering Cost of Goods Manufactured (COGM) Calculation for Optimal Profitability in Manufacturing Business