![]() ![]() The company had an opening inventory of $35,000 and made $225,000 of purchases during the period.Īs the company uses the periodic inventory system, what is the journal entry for the cost of goods sold at the end of the accounting period? makes the physical inventory count and determines the ending balance of inventory to be $31,000. Cost of goods sold example Periodic inventory systemįor example, at the end of the accounting period, the company XYZ Ltd. Likewise, the company usually records the cost of goods sold immediately with the reduction of the inventory after making the sale. Unlike the periodic inventory system, the inventory balance under the perpetual system is constantly updated when there is an inventory in or out. Account Debit Credit Cost of goods sold 000 Inventory 000 Under the perpetual inventory system, the company can make the cost of goods journal entry by debiting the cost of goods sold account and crediting the inventory account. The opening inventory is the balance of the last period while the ending inventory is determined with the actual physical count together with applying the inventory valuation method, such as FIFO or weighted average method. The inventory in this journal entry is the amount that is remained from the opening inventory deducting the ending inventory. Account Debit Credit Cost of goods sold 000 Purchases 000 Inventory 000Īfter this journal entry, the balance of the purchases account will become zero, and the balance of the cost of goods sold which is on the debit side will be presented in the income statement to deduct the sales revenue in determining the gross profit. #COGS JOURNAL ENTRY PLUS#Likewise, the company calculates the cost of goods sold with the formula of the opening inventory plus purchases and minus the ending inventory.Īt the end of the period after calculating the cost of goods sold, the company can make the journal entry by debiting the cost of goods sold account and crediting the purchases account and inventory account. This is due to, under this inventory system, the company needs to make a physical count of inventory before it can calculate the cost of goods sold. Instead, the cost of goods sold is usually only recorded at the end of the period. Under the periodic inventory system, the company does not record the cost of goods sold immediately when it makes the sale. ![]() Cost of goods sold journal entry Periodic inventory system Likewise, if two companies use different inventory systems, they will have different journal entries for the cost of goods sold. However, under the periodic inventory system, the company usually only makes the journal entry for the cost of goods sold at the end of the period when it has determined the balance of the ending inventory. Under the perpetual inventory system, the company makes the journal entry for the cost of goods sold immediately after making a sale in order to have the inventory balance updated perpetually. This is depending on whether the company uses the perpetual inventory system or periodic inventory system. ![]() In this case, the company can make the journal entry for the cost of goods sold after the sales or only make the journal entry for it at the end of the period. Cost of Goods Sold Journal Entry OverviewĬost of goods sold is the expense that the company incurs when it makes the sales of the inventory goods. ![]()
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