What is the Cost of Goods Sold Formula?
by Fahad
(KSA)
What is the cost of goods sold formula?
A: The cost of goods sold formula (also known as the cost of sales formula or equation) is:

Or to spell it out here:
Cost of Goods Sold = Opening Inventories + Purchases - Closing InventoriesThe
Purchases in the above formula actually often has various sub-components (especially in accounting tests and exam questions - they love to test this), namely:
- Actual purchase cost,
- Carriage (transport costs),
- Import duties,
- Purchases returns.
The full total of purchases (which would go in the cost of goods sold formula) would thus be:
Total Purchases = Purchases (purchase costs) + Carriage + Import duties - Purchases ReturnsSee the full lesson on
Sales, Cost of Goods Sold and Gross Profit and check out more questions and answers for the cost of goods sold formula further below in the comments.
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