![]() After figuring out the amounts associated with it, business owners need to record them in the books of accounts of the company. This and proper journal recording can help you make informed decisions about your inventory and help ensure accurate financial reporting.Most companies that involve in selling merchandises and products cannot get away with the calculation of the cost of goods sold. ![]() With BeProfit, you can achieve even more intuitive tracking through a one-stop dashboard that can monitor your profits and expenses in real time. These entries can help you keep track of inventory levels, costs, and profits. Journal entries with the periodic system are simple and don't require constant sales tracking. » Do you use Wix? Discover the best Wix inventory management apps Manage Your Periodic Journal Entries With Confidence To adjust the COGS, the company would debit or credit the COGS account, depending on the adjustment needed. This may be necessary if, for example, there are errors in inventory counts that affect the COGS. Cost of goods sold adjustment - In some cases, a company may need to adjust the cost of goods sold for a particular period.The company would debit the sales returns account and credit the accounts receivable or cash account. Sales returns - If a customer returns products to the company, this would need to be recorded.The company would debit the accounts payable account and credit the inventory account. Purchase returns - If there is defective or incorrect inventory from a supplier that needs to be returned, it should be recorded in the journal.To record this, the company would debit the COGS account and credit the inventory account. Write-off of obsolete inventory - If a company has inventory that is no longer sellable due to damage, expiration, or other reasons, it may need to be written off.This may help lower wasted costs, which can aid in improving revenue and profit margins. ![]() Ending with a balance higher than the beginning inventory balance can indicate that the business might need to: The ending balance of $7,500 will be the starting inventory balance in the next accounting period. The below table shows the final inventory balance for the camping gear at the end of the accounting period. Calculate the Final Inventory Balance Account The debit to the inventory account represents the increase in our inventory assets due to the adjustment, while the credit to the COGS account reflects the expense we incurred. The business counted 250 bags with a total cost of $12,500. Next is a physical count of the inventory at the end of the period to adjust the account and reflect the actual inventory on hand. » Find out how to calculate cost of goods sold (COGS) for your Shopify store Adjust the Inventory The debit to the COGS account represents the expense we incurred in selling the bags, while the credit to the inventory account reflects the decrease in our inventory assets due to the sales. The business sold 150 bags and the cost per bag is $50, so the COGS is $7,500. Second, record the sales of the camping bags and the COGS. To record this transaction, use the following journal entry: The business bought 200 bags for $50 each, for a total cost of $10,000. The first step is to record the purchases of the camping bags in our inventory account. The goal is to perform the necessary periodic journal entries to update inventory accounts and help ensure accurate financial statements. ![]() During the accounting period, it sells 150 bags for a total of $12,000. The retailer purchases 200 camping bags for $50 each and starts the accounting period with 100 bags in stock.
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