COMMERCE 1AA3 Chapter Notes - Chapter 6: Financial Statement, Gross Profit

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 1AA3
• Professor: Sameera Hassan

Document Summary

Chapter 6: inventory and cost of goods sold. Cost of sales or cost of goods sold is often the largest expense of a company. The company buys inventory, an asset carried on the books at cost. The goods the company sells are no longer their assets, thus the cost of goods of inventory that"s sold is shifted into the expense account (cost of sales) Most important expense for a company that sells goods rather than services. Basic concept of how to identify inventory when the seller delivers the goods to the buyer. Inventory"s cost shifts from asset to expense when the seller delivers the goods to the buyer. Sales revenue is based on the sale price on the inventory sold. Cost of goods sold is based on the cost of the inventory sold. Inventory on the balance sheet is based on the cost of the inventory still on hand.