Related article Cost of Goods Sold for Coffee Shop - Explained Cost of goods sold VS Expenses Gross revenue is recognized as per revenue recognition concept accounting standards. Gross revenue is used as a metric and provides a better view of the health of the organization and better comparison among the peer’s companies. Gross revenue is popularly referred to as the top line while net revenue is popularly referred to as the bottom line. There is no consideration for any expenditures from any source. When gross revenue is recorded, all income from a sale is accounted for on the income statement. When deductions are netted against gross revenue, the aggregate amount would be referred to as net revenue or net sales. It indicates the capability of the company to make sales in order to generate a profit. It refers to the total amount of sales recognized for the reporting period before any deductions are made in order to arrive at gross profit. Statement of Cost of goods sold Particulars Amount ($) Amount ($) Beginning inventory of supplies X + Purchases (supplies) X -Purchases returns X + Direct labor (salary, wages) X Cost of goods and services XX -Ending inventory (X) Cost of goods sold XX Gross revenue The other costs that cannot be easily traceable and cannot be linked to the product are not associated with being the cost of goods sold. These are easily traceable costs and can be easily identifiable from looking at the products. It is basically the direct materials, direct labor, and direct expenses involved in making the products. Cost of goods sold refers to the costs involved in making the goods or services that are being sold.
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