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Calculating COGS
09-28-2015, 06:30 AM
Post: #1
Video Calculating COGS
Hi all,

Can anyone please take a look at how COGS is being calculated for a distributor company below and give me their opinion.

We use sage simply and a software called "AIMS 360".

At the end of each month, for each division (brand), they add beginning inventory which they get from AIMS to purchase account GL 5004 , and deduct ending inventory from it. As a result, the balance of purchase account at the end of the month in simply is cost of products. for example:

GL 5004 Purchase account:

May.01 0.00- Our acc year is Apr.31
May.22 Dr. Purchase 1,000 1,000
May.27 Dr. Purchase 500 1,500
May.31 DR. Dr. Ending Inv 600 2,100 -I don't understand
why they debited End Inv
June.05 Dr. Purchase 200 2,300
June.25 Dr. Purchase 400 2,700
June.30 Cr. Ending Inv 700 2,000- Cost of Products

on P&L:

Cost of products 2,000
Duty 800
Freigh In 450

COGS 3,250

I don't understand why they touch purchase account instead of just adding these figures to get the COGS. the company margin is too high, and I think this could be one one the reasons.
I'd very much appreciate your thought on this.

Thank you so much,

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