Cost of goods available for sale is the maximum amount of goods, or
inventory
Inventory (American English) or stock (British English) refers to the goods and materials that a business holds for the ultimate goal of resale, production or utilisation.
Inventory management is a discipline primarily about specifying the shap ...
, that a company can possibly sell during an accounting period. It has the formula:
[{{Cite book , url=https://www.worldcat.org/oclc/81601239 , title=Intermediate accounting , date=2007 , publisher=J. Wiley & Sons Canada , others=Kieso, Donald E. , isbn=978-0-470-83979-9 , edition=8th Canadian , location=Mississauga, Ont. , oclc=81601239]
Beginning Inventory
An inventory valuation allows a company to provide a monetary value for items that make up their inventory. Inventories are usually the largest current asset of a business, and proper measurement of them is necessary to assure accurate financial s ...
(at the start of accounting period) +
purchase
Purchasing is the process a business or organization uses to acquire goods or services to accomplish its goals. Although there are several organizations that attempt to set standards in the purchasing process, processes can vary greatly between ...
s (within the accounting period) +
Production
Production may refer to:
Economics and business
* Production (economics)
* Production, the act of manufacturing goods
* Production, in the outline of industrial organization, the act of making products (goods and services)
* Production as a stati ...
(within the accounting period) = cost of goods available for sale
Notice that purchases and production might not be the same throughout the year, since purchase cost and production cost might vary. But at the end, the total cost of purchases and production are added to beginning inventory cost to give cost of goods available for sale.
Alternatively the costs of goods available for sales can be computed from the costs of sales:
Costs of goods available for sale −
Ending Inventory − Inventory write-downs =
Cost of goods sold
Cost of goods sold (COGS) is the carrying value of goods sold during a particular period.
Costs are associated with particular goods using one of the several formulas, including specific identification, first-in first-out (FIFO), or average cost ...
References
Inventory