1) Why is Cost of Goods Sold listed under revenues on the Income Statement if it is actually an expense?2) Does it have a credit or debit balance?3) What other if any statements does it appear on, and what accounts does it affect?I am providing a sample question and if you could help explain it I would appreciate it."ABC International has a beginning balance in its inventory asset account of $500,000. It buys $450,000 of materials from suppliers during the month. At month-end, it counts its ending inventory and determines that there is $200,000 of inventory on hand. The cost of goods sold journal entry is:"Debit CreditCost of Goods Sold $750,000Purchases $450,000Inventory $300,000"This entry matches the ending balance in the inventory account to the costed actual ending inventory, while eliminating the $450,000 balance in the purchases account."
1) Why is Cost of Goods Sold listed under revenues on the Income Statement if it is actually an expense?
2) Does it have a credit or debit balance?
3) What other if any statements does it appear on, and what accounts does it affect?
I am providing a sample question and if you could help explain it I would appreciate it.
"ABC International has a beginning balance in its inventory asset account of $500,000. It buys $450,000 of materials from suppliers during the month. At month-end, it counts its ending inventory and determines that there is $200,000 of inventory on hand. The cost of goods sold
Debit Credit
Cost of Goods Sold $750,000
Purchases $450,000
Inventory $300,000
"This entry matches the ending balance in the inventory account to the costed actual ending inventory, while eliminating the $450,000 balance in the purchases account."
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
