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1/ if inventories increase cost must dicrease ..2 / if nventories inccrease cost increase ..3/ if invetroies dicrease cost dicrease ..
Inverse relation
1/ if inventories increase cost must dicrease
Normal entry when sale goods from inventoy
Debit /cost of goods sold
Credit / inventory
So its clear that increase in inventory will decrease cost of goods sold and vice versa
The relation between inventories and cost of sales is ?
The below given is the correct answer:
1/ if inventories increase cost must dicrease
the answer is #1
Answer should be (1). If closing inventories increase the cost of sales will decrease.
Relatively the answer is3 if inventories decrease cost decrease
1/ if inventories increases cost must decrease
The Answer1
Cost of goods sold =First period stock + purchases + purchases expenses + sales expenses- Returns purchases - stocks last period (from the reality of the annual inventory)Therefore Valmkhozon (first period + another period) is considered part of the equation of cost of goods soldAnd of course the cost of goods sold only appear in the income statementBut what is shown in the balance sheet in the current assets side is (stocks last period)In another cost of goods sold expense is considered a special process to trade in goods
The most relevant connection between inventory and COGS is the way the two relate to establish a company's profitability. Revenue is the amount of money a company takes in as a result of selling its products. This number is important, but it does not reflect whether a company is making money or losing money. Profitability can only be determined once a business owner subtracts out the costs incurred in generating that revenue.
answer is1 according to absorption costing system
