For a retail entity,cost of sales is calculated as follows:
A) ending inventory + purchases - beginning inventory.
B) purchases - ending inventory - beginning inventory.
C) beginning inventory - purchases + ending inventory.
D) beginning inventory + purchases - ending inventory.

Question

Quizplus · Accepted Answer

Cost of sales, also known as cost of goods sold (COGS), is calculated by adding the beginning inventory to the purchases made during the relevant period and then subtracting the ending inventory from this figure. This represents the cost of the goods that were sold during the given period. Hence, the formula for COGS is beginning inventory + purchases - ending inventory. Therefore, the correct choice is D.

For a Retail Entity,cost of Sales Is Calculated as Follows