what figue is in the trial balance cost of sales or purchases
What figure is in the trial balance: cost of sales or purchases?
Answer: In a trial balance, you typically find the purchases figure rather than the cost of sales. Let’s break down why:
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Purchases: This is the total amount spent on buying goods intended for resale during the accounting period. It directly appears in the trial balance.
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Cost of Sales: This figure is calculated and not directly entered into the trial balance. It’s derived from the following formula:
\text{Cost of Sales} = \text{Opening Inventory} + \text{Purchases} - \text{Closing Inventory}- Opening Inventory: The value of inventory at the start of the period.
- Purchases: Total goods bought for resale.
- Closing Inventory: The value of unsold inventory at the end of the period.
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Use in Financial Statements: The cost of sales is used when preparing the income statement, not directly in the trial balance, because it represents the cost of goods sold during the period.
Summary: In the trial balance, you will see the purchases figure. The cost of sales is calculated for financial reports, using both purchases and inventory adjustments.
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