Recent Articles

Cost of Goods Sold

A section of the income statement for profit and loss statement. There are two prominent methods used to calculate the dollar value of cost of goods sold. These two methods are the specific item method and the inventory adjustment method.

Inventory Turnover Rate

02/19/2016

One of the many ratios used in business, the inventory turnover rate is often misunderstood, miscalculated and misused.  The traditional business course in academia explains that ideally the inventory turnover ratio (rate) is the highest number [...]

Cost of Sales – Various Formats

01/27/2015

Many business owners misunderstand the use of term ‘Cost of Sales’ by restricting it to just simply ‘Cost of Goods Sold’.  Basically, most business entrepreneurs and even accountants don’t realize that it has several different names and [...]

Variable Costs

10/14/2014

Variable costs are those business related expenditures that vary in proportion to production.  The most common examples of variable costs include raw materials, labor, packaging and distribution expenses related to producing and delivering the [...]

Point of Sale System – Introduction

12/03/2013

Almost all retail based operations require a Point of Sale (POS) System to properly record the customer and product activity.  So what is a Point of Sale System?  How is it set up?  What information should we get from this system?  How does a [...]

Chart of Accounts – Layout

11/27/2013

The goal of accounting is to record the economic activity of the business.  This is achieved by entering each economic transaction into a set of books.  The books are formatted to reflect the balance sheet and income statement items.  The chart [...]

Definition of Contribution Margin

04/06/2013

Contribution margin is a core business concept and is often used in cost accounting to identify the amount of financial contribution a sold product provides to the company.  Simply put, contribution margin is the sales price less the direct costs [...]

Internal Revenue Service (IRS) Definition of an Expense

04/03/2013

The Internal Revenue Service defines a business expense as ‘ordinary’ and ‘necessary’.  Ordinary expenses are those costs typically incurred in your industry.  So a restaurant would not ordinarily purchase vaccines.  And a medical [...]

How is Cost of Goods Sold in Retail Determined?

02/16/2013

Each industry is different in determining costs of goods sold or cost of services rendered.  Retail uses two distinct methods to calculate costs of goods sold.  The first is called ‘Specific Identification’ whereby each item sold is [...]