Cost of Goods Checkpoint Essay Example for Free

Cost of Goods Checkpoint EssayA multi-step income statement for a trading business highlights the fact that between 40% and 60% of revenue from sales is accounted for as the cost of goods sell. The cost of goods attributed to a companys products is outlayd as the company sells these goods. There are several ways to calculate COGS but one of the to a greater extent basic ways is to start with the beginning take stock for the period and add the total amount of purchases made 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 merchandise inventory + net purchase), less the ending merchandise inventory (p. 244). In a wholesale or retail trading business, merchandise held for resale in the normal course of business is the largest asset owned by the organization. For this reason it is vital that exact up-to-date records be maintained when goods are ac quired and inventories taken. Finished goods and or merchandise trade names up cost of goods sold.There are two classifications of inventory merchandiser or manufacturer. In a merchandiser company inventory consists of many items all different. Whereas, a manufacturer, some inventory may not be ready (Kimmel, Weygandt, Kieso, p. 282). Examples of items that make up cost of goods include produce, clothing, electronics, items that can 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 will 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 busine ss decision making (6th ed. ). Retrieved from The University of Phoenix eBook appeal database