week 7 cost of goods

David Frost
XACC/290
January 18, 2015
JoAnn Rodda

To calculate the cost of goods sold you would take the beginning inventory plus your cost of goods purchased, and then when a business sells any of its goods that become the cost of goods sold for the business. The beginning inventory plus the cost of goods purchased, and the ending inventory all of those combined they all make up a business cost of goods that are for sale. Then when a business sells any of its goods then that becomes a business cost of goods sold. The goods that are not sold by the end of the business accounting period they become the business ending inventory which is part of the cycle that a business uses. A business uses one or two systems they use either a perpetual inventory system or a periodic inventory system. The company which ever system it decides to use both systems works hand in hand in completing the business cycle which is what a business needs so it can calculate the cost of goods sold. Determine the cost of goods on hand at the beginning of the accounting period and add to it the cost of goods purchased. Then subtract the cost of goods on hand at the end of the accounting period this is using the periodic system, and under the perpetual system a company determines its cost of goods every time a sale occurs so depending which system a company uses will determine how they calculate the cost of goods sold.