3 ms·
AKA Cost of Goods Sold (COGS)
by cjbgkagh 4y ago
AKA Cost of Goods Sold (COGS)
- beambot 4y agoNot quite. Inventory is an asset on the balance sheet. It only becomes COGS on the income statement when the goods are sold.
- cjbgkagh 4y agoI figured the idea of labeling the inventory as an asset was part of the practice of later deducting the cost (expensing). I.e. you can’t expense it twice.
- rgbrenner 4y agoI think you're both saying the same thing... when you buy new inventory, the entries are: (subtract cash) (add to inventory assets) This is not an expense yet. Then later when you sell it: (subtract inventory) (add to cogs) COGS is an expense account. Since an income statement doesn't show assets, it wouldn't appear on the income statement until it becomes a COGS expense.
- deleted 4y ago[deleted]
- conductr 4y agoYes basically because of matching. The income statement is sloppy without it and difficult to determine operating performance https://en.wikipedia.org/wiki/Matching_principle https://en.wikipedia.org/wiki/Matching_principle