MANAGEMENT

Detailed explanation-1: -For many companies, merchandise inventory is one of the biggest assets recorded on the balance sheet. When merchandise is sold, its costs are recorded as part of COGS on a company’s income statement. COGS is then used to calculate gross and net profit.

Detailed explanation-2: -Cost of goods sold (COGS) is calculated by taking the value of inventory at the beginning of the period being studied, adding the cost of any new inventory purchased over the covered period, and subtracting the value of inventory held at the end of the period.

Detailed explanation-3: -Merchandise inventory is not an income statement account. It’s an asset, and its ending balance is reported as a current asset on your balance sheet. COGS, however, is on your income statement and changes in your merchandise inventory affect your COGS.

Detailed explanation-4: -Cost of Goods Sold (COGS) measures the “direct cost” incurred in the production of any goods or services. It includes material cost, direct labor cost, and direct factory overheads, and is directly proportional to revenue.

Detailed explanation-5: -Cost of goods sold (COGS) definition It appears on an income statement and typically includes money spent on raw materials and labour.