Closing stock = ₦5,000What is the cost of goods sold?
Answer Details
To calculate the cost of goods sold, we need to start with the formula:
Cost of Goods Sold = Opening Stock + Purchases + Carriage inwards - Closing Stock
- The Opening stock is given as ₦10,000
- The Purchases is given as ₦20,000
- The Carriage inwards is given as ₦5,000
- The Closing stock is given as ₦5,000
Substituting these values into the formula, we get:
Cost of Goods Sold = 10,000 + 20,000 + 5,000 - 5,000
Cost of Goods Sold = ₦30,000
Therefore, the cost of goods sold is ₦30,000.
Explanation:
- Cost of Goods Sold refers to the cost of the products sold during a particular accounting period.
- To calculate it, we add the cost of the goods purchased to the cost of any additional expenses related to the purchase such as carriage inwards and then subtract the cost of any goods that are still in stock (i.e. the closing stock).
- In this case, the opening stock was ₦10,000, and the purchases were ₦20,000. The carriage inwards, which is an additional expense related to the purchase, was ₦5,000.
- The closing stock was ₦5,000, which means that ₦5,000 worth of goods were still in stock at the end of the accounting period.
- By substituting these values into the formula, we get the cost of goods sold which is ₦30,000.