Accounting / August 3, 2018 / Holly Mercer
Cost of Sales For a manufacturer, cost of sales is the expense incurred for labor, raw materials, and manufacturing overhead used in the production of goods. While it may be stated separately, depreciation expense belongs in the cost of sales. For wholesalers and retailers, the cost of sales is essentially the purchase cost of merchandise used for resale. For service-related businesses, cost of sales represents the cost of services rendered or cost of revenues
Both the debit and credit columns are calculated at the bottom of a trial balance. As with the accounting equation, these debit and credit totals must always be equal. If they aren’t equal, the trial balance was prepared incorrectly or the journal entries weren’t transferred to the ledger accounts accurately.
Refers to the overall wealth of a business as demonstrated by its cash accounts, assets, and investments. Often called "fixed capital," it refers to the long-term worth of the business. Capital can be tangible, like durable goods, buildings, and equipment, or intangible such as intellectual property.
In some cases, your business may choose to use cash accounting. Cash-based accounting is simple in comparison to accrual accounting. Sales are posted when the cash is received from the customer, regardless of the date that the product was delivered. Expenses are posted in the same manner, or when the cash is disbursed to pay the bill. Smaller businesses and businesses that do not carry inventory often use the cash basis of accounting.
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