Simple Cost of Goods Sold Calculation
For those of you who often deal directly with the sale of goods, have you ever heard the term Cost of Goods Sold or COGS yet? Cost of Goods Sold (COGS) is an element of a business income statement. If the company will prepare an income statement, then this calculation must be done. The accuracy of the COGS calculation affects the level of accuracy of profit and loss achieved by related companies.
Understanding Cost of Goods Sold alone, according to Indonesian accounting principles can be explained as the amount of expenses and expenses that are allowed, both directly and indirectly. This is to produce goods or services in conditions and places where the goods can be sold or used. To get the exact, rational, and reasonable COGS calculation, we must recognize the components that determine it.
Elements in COGS
In calculating Cost of Goods Sold, things that need to be understood in advance are the elements that make up COGS. The elements that make it up include:
Initial inventory, is a stock of products to be sold and available at the beginning of a period or the current financial year. The company’s initial inventory balance is in the current period balance sheet or in the company’s initial balance sheet or report in the previous year.
End inventory, is the stock of goods / products at the end of the current period or financial year. The company’s ending inventory balance will be known from business adjustment data at the end of the period.
Net product purchases, which means all product purchases made by business people in cash or credit, plus transportation costs and reduced by purchase rebates and purchase returns.
HPP Calculation Formulas
With the definitions explained, the formula for calculating cost of goods sold can be explained as follows:
Calculation of Cost of Goods Sold is very important, because with the right calculation will make the company’s financial statements specifically the income statement that can be accounted for and accurate. Because of the importance of calculating COGS, it is expected that the application of COGS concept can be done well and can be used to determine the right policies for the business.
After knowing what the cost of goods sold applies, prepare a financial estimate. Estimates include an income statement, balance sheet, and most importantly a projected cash flow statement. There are many online services to help businesses, so don’t fall into complicated Excel spreadsheets. Use online business planning tools that include financial forecasts to streamline processes and better collaborate with teams in business.
The best way to help business owners manage COGS regularly is to find an online solution that will automate business finances. This helps the owner see these numbers and compare them automatically to the right time period. It also makes it easier to prepare financial statements faster, save time and be more cost efficient.