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11.3 Cost of Sales vs Cost of Goods Sold
- 2. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
Supplier Business Customer
All expenses
incurred in
acquiring
stock and
getting it
ready for sale.
Cost of Goods Sold
All costs
involved in
getting stock
from store to
the customer
Other Expenses
11.3 COST OF SALES V
COST OF GOODS SOLD
- 3. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
There is a difference between Cost of Sales and Cost of Goods Sold:
11.3 COST OF SALES V
COST OF GOODS SOLD
Cost of Goods SoldCost of Sales
The cost price of stock purchased
from suppliers
All expenses incurred in
purchasing stock from suppliers
and getting it ready for sale.
Includes:
Cost of Sales
Cartage inwards
Packaging costs
Buying expenses
Customs duty
- 4. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
Cost of Goods Sold
All expenses incurred in acquiring stock and getting it ready for sale.
Includes:
Cost of Sales – cost price paid for stock
Cartage inwards – delivery costs incurred in getting stock into the business
Packaging costs – costs of packaging stock on its way into the store
Buying expenses – costs associated with buying stock
Customs duty – for stock bought from overseas
11.3 COST OF SALES V
COST OF GOODS SOLD
- 5. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
Supplier Business Customer
Cost of Goods Sold Other Expenses
Cartage inwards Cartage outwards
Cartage inwards Cartage outwards
11.3 COST OF SALES V
COST OF GOODS SOLD
- 6. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
Supplier Business Customer
11.3 COST OF SALES V
COST OF GOODS SOLD
Cost of Goods Sold Other Expenses
• Cost of sales
• Cartage in
• Packaging
• Buying expenses
• Customs
• Cartage out
• Carry bags
• Advertising
• Vehicle expenses
• Etc.
- 7. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
Gross Profit
Is the profit from selling stock
Revenue
Cost of Goods Sold
Gross Profit
-
=
Supplier Business Customer
54000 90000
90000
54000
36000
11.3 COST OF SALES V
COST OF GOODS SOLD
- 8. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
Gross Profit
Must be adequate to
cover the firm’s
Other Expenses…
Revenue
Cost of Goods Sold
Gross Profit
Stock Gain or Stock Loss
Adjusted Gross Profit
Other Expenses
Net Profit
-
+ or -
=
=
-
=
90,000
47,000
43,000
28,000
15,000
90,000
47,000
43,000
58,000
(15,000)
11.3 COST OF SALES V
COST OF GOODS SOLD
Firm A Firm B
- 9. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
TASK
In-class Homework
SQ5 X
SQ6 X
Ex11.4 X
Ex11.5 X