What is the Cost of Sales?
The cost of sales involves the identification of the expenses that are related to the manufacturing process. In particular, the cost of sales addresses the expense associated with purchasing raw materials that are necessary to produce the products sold by the company. Sometimes referred to as the cost of goods sold or COGS, the cost of sales is often utilized as a means of determining the overall cost of creating the finished products that generate revenue for the company. In terms of calculating the actual cost of sales, the data required to make an accurate assessment appears on the income statement for the company. Along with the cost of materials needed to produce a finished product, there are also other factors that figure into the overall cost of sales. While not every company will include the same elements in the calculation of the cost of sales, there are several types of expenses that are highly likely to classified in this manner regardless of the size of the business enterpr
If all items purchased during the year are sold then purchases is equal to the cost of sales. However, sometimes items purchased are not sold by the end of the year. These items are referred to as closing stocks. The cost of sales in these cases is not the total purchase figure. Instead it is equal to purchases less the items left unsold at the yearend i.e.
