Calculating COGS With Accounting Software

One of the elements stated in the Profit Loss Report of a company is COGS (Cost Of Good Sold) also known as sales base price. When a company is preparing the financial report, especially profit loss report, then the cost of goods sold occurred in the current period should be calculated. An accurate sales base price will produce an accurate profit loss report for company.

Key Elements in Cost Of Good Sold

The essential elements to produce COGS include initial inventory, ending inventory, and net purchase. Below is the detailed information of these elements:

  1. Initial inventory: initial inventory in the beginning of period or current year. Beginning inventory balance is stated in the current or previous balance sheet.
  2. Ending inventory: inventory in the end of the period. Ending inventory balance is obtained through adjustment by the end of period.
  3. Net purchase: all purchases by the company, either cash or credit, including the freight cost and deducted by discounts and purchase return occurred.

Calculating COGS indeed a complicated task, stock opname or calculating monthly stock card must be conducted. Since it performs regularly, then the record method applied is Periodic. However, since periodic method takes more time, then it is hardly performed regularly every month.

Calculating COGS With Accounting Software

Calculating COGS with Accounting Software, like Zahir Accounting will be more easier. In Zahir Accounting, calculating COGS only needs 4 simple steps as follow:

  1. Create a new product in menu > product data
  2. Next, select account code menu and base price > Set the calculation method of base price on the product by selecting the available options in base price methods.
  3. Make purchase through Purchase Menu > Received Goods >Create Purchase on the same product with different purchase price on the different invoice.
  4. Check in Data > product data then the COGS will be displayed based on the COGS calculation methods as previously determined.

Using accounting software to calculate COGS will produce more accurate report and save a lot of time and stock opname is no longer needed. This will help you to recognize your business profit through the financial report which is made anytime. The accounting software automatically produce the needed financial report.