Calculating Cost of Goods Sold

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Calculating the cost of goods sold requires taking beginning inventory, adding purchases and subtracting the ending inventory. Determine the costs that actually go into building inventory with information from a certified public accountant in this free video on finance.

Part of the Video Series: Finance & Accounting Facts
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Video Transcript

My name is Miranda Chook, a CPA. Calculating cost of goods sold can be done in a few different ways. One of the more basic ways to understand it is to take beginning inventory, add purchases, and subtract ending inventory. That then solves for cost of goods sold which is typically one of the larger items on a companies income statement. What makes this more complex are the costs that actually go into building inventory and discussions about cost in, cost accounting are actually beyond the scope of this particular segment, but just know that to calculate costs of good sold, you can use that calculation I just provided. But to understand what makes up the dollars and the layers of that number, then that will get into more complex discussions regarding cost accounting.

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