This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. The ending inventory of $30,000 is then deducted from the $320,000 cost of goods available for sale to equal the $290,000 cost of goods sold. Companies that make and sell products or buy and resell its purchases need to calculate COGS in order to write off the expense, according to the IRS. A company’s Cost of Goods Sold, one of the most important measurements of a profitable, successful business, is based in part on merchandise inventory figures.Ĭommon examples of merchandise include electronics, clothes, and cars held by retailers. Merchandise inventory is classified on the balance sheet as a current asset. Keep a close eye on inventory tracking numbers to make adjustments on the fly. What Are The Direct Costs? Definition, Examples, And Benefit This means it’s unlikely a B2B business will have to worry about it. Manufacturing inventory, MRO inventory, and raw materials inventory are not considered merchandise inventory. That’s because, fundamentally, merchandise inventory is goods that are intended to be resold at a higher price than they were acquired for. The inventory at period end should be $7,872, requiring an entry to increase merchandise inventory by $4,722. What Items Are Included In Cost Of Goods Sold?īeginning merchandise inventory had a balance before adjustment of $3,150.What Are The Direct Costs? Definition, Examples, And Benefit.
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