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Not quite. Inventory is an asset on the balance sheet. It only becomes COGS on the income statement when the goods are sold.
by beambot 4y ago
Not 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