Is cost of sale a debit?
If a company is using the periodic inventory system, which is represented by the calculation just shown for the cost of sales, then the costs of purchased goods are initially stored in the purchases account. This is typically a debit to the purchases account and a credit to the accounts payable account.
What account is cost of sales?
Cost of goods sold is not an asset (what a business owns), nor is it a liability (what a business owes). It is an expense. Expenses is an account that contains the cost of doing business. Expenses is one of the five main accounts in accounting: assets, liabilities, expenses, equity, and revenue.
Is cost of sales an expense?
Because COGS is a cost of doing business, it is recorded as a business expense on the income statements.
Why is cost of sales a credit?
For Cost of Sales, debit values are normal. Credit entries in Cost of Sales accounts usually occur as a function of customers returning an item. When this happens, the entry starts out in the sales journal with a debit to ‘Returns’ and a credit to the cash handed back to the customer.
How do you record cost of sales?
Your cost of goods sold record shows you how much you spent on the products you sold. To calculate this amount, you multiply the number of products you sold by the cost it took to make or purchase these products. Your journal entry has you debiting the cost of goods sold account and crediting your inventory account.