Record cost of goods sold: Financial events series, part 24 of 29
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TechnolOntario has completed their first year of business. On the last day of their fiscal year (December 31, 2007), they have some software inventory still on hand. The cost for these remaining supplies was $3,500.
Over the course of the year, recall that TechnolOntario made an initial software supply purchase of $1,500, then bought another supply for $5,000 on credit, and in the last part of the year bought more supplies for $80,000.
The total cost of supplies purchased during the year was $86,500. With $3,500 of supplies remaining at the end of the year, the cost of the inventory that was used is $83,000. This amount is the cost of goods sold.
The journal entry would record this as an $83,000 debit for the cost of goods sold expense, and an $83,000 credit for a software inventory liability.
The financial statements would read:
Information on this series
To demonstrate how various business transactions and other economic events impact the financial statements, this series tracks the accounts of the first fiscal year of a fictional start-up company called TechnolOntario, Inc. Common financial events are introduced and recorded one by one, and they accumulate on the financial statements as TechnolOntario’s fiscal year progresses.
Note that together these examples form a series of 29 articles. Check our complete list of accounting examples to specifically select which ones you’d like to see. Or you can follow the series from start to finish. This article is part 24 of 29.
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References
Markle, K. (2004, August). Introduction to Accounting. Presentation delivered at Schulich School of Business, York University, Toronto, Canada.
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