#Cost of revenue vs cogs how to#

Ending inventory: the amount of closing stock for the specified period.

Freight In: the transport costs incurred for the raw materials being brought to the setup location or factory.

Purchases: any costs incurred for purchasing manufactured products or setting up a product, for instance, raw materials.

Beginning inventory: this is the inventory amount at the opening of the stock period.

So, the extended COG formula is:ĬOGS = Beginning inventory + purchases + Freight In – Ending inventory – Purchase Discounts – Purchase Returns and Allowances. It’s a more detailed formula that includes components such as returns, freight charges, discounts, and allowances. There is also an additional inventory purchased during the 2020-2021 fiscal year amounting to $2,000 and $1500 ending inventory recorded at the fiscal year ended 2021. The beginning inventory recorded for the fiscal year ended in 2020 is $3,000. Therefore, the total costs of goods (COG) sold in that quarter are $24,000. If your business had a beginning inventory of $20,000 and the purchases totaled to $9,000 for that quarter, and you hand an ending inventory of $5,000, then your total COGS for that quarter will be:ĬOG= Beginning Inventory + Total Purchases on the Specified Period – the Ending Inventory Your inventory record’s beginning inventory will be on 1st January and ends on March 31. Let’s say you want to calculate the cost of goods sold in the first quarter of 2021.

#Cost of revenue vs cogs how to#

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