Cost of goods sold is amount paid by Merchandising Corporation for the merchandise sold during an agreed period of time. It is prepared on monthly basis on the completion of accounting cycle to calculate cost of goods sold and gross profit of the company. This is the price at which the goods were purchased and direct cost associated by bringing them to the sales room and completing the sale. Cost of goods sold is important to include in the balance sheet and its actual calculation is based on the manufacturing status of the company either the company is producing single product or multiple products. Cost of goods sold sheet will help you to report and analyze sales of the company of all sizes. It is important part of general ledger and helps you to calculate important things like break-even point.
Formula to Calculate Cost of Goods Sold
Cost of goods sold is an important part of business accounting therefore it is important to prepare this sheet on time. Following formula will help you to calculate cost of goods sold:
Beginning Inventory + Inventory Purchased – End Inventory = Cost of Goods Sold
Here is preview of this Free Cost of Goods Sold Sheet Template created using MS Excel,
Tips to Design Cost of Goods Sold sheet
Cost of goods sold sheet is an important part of whole accounting cycle and following tips will help you to design cost of goods sold sheet:
- Get amount of beginning inventory for the month you are calculating the cost of goods sold. This will be the ending inventory of previous month so you can take it from the balance sheet of last month.
- Calculate total cost of direct material purchased during the month and add this number in the beginning inventory number. This will be the cost of material used in the production of your product. Do not include amount of office supplies because it will be taken in the indirect expenses.
- It is time to add cost of direct labor used during this month in the manufacturing of goods. Direct labor will be the wages of workers who run manufacturing equipment and provide direct supervision. Wages paid, taxes of employer including social security and benefits paid by the company for employees will be calculated to get direct labor cost.
- Subtotal of the beginning inventory will be added in the cost of direct materials purchased, plus cost of direct labor. You will get a number for the total goods available for sale during month.
- Value of ending inventory will be subtracted from the total cost available for sale during month. You will get a number called cost of goods sold for this month. This cost is calculated by including direct cost of goods manufactured.
- If multiple products are manufactured by your company then you have to calculate individual cost by product. After this multiply each individual cost with total sale of the each product of the month and after getting total sales of each product, add them together and get total cost of goods sold.
Here is download link for above mentioned Free Cost of Goods Sold Sheet Template,