Understand the meaning of COGS

Every businessman or seller should be able to understand what HPP is, you can say that in short, HP is the price per picis, in English it is called the COGS. The article photo HPP is one of the important things in running a business or building a business.

What is COGS?

In the world of accounting or even in the world of business and sales of COGS is an abbreviation of the cost of goods sold or price per picis in Javanese where from the definition of COGS there is a total direct expenditure of a company that is able to produce a product that will be suitable for sale in one period .

Some of these things fall into the direct cost category, including direct labor salaries, raw material procurement costs and overhead costs. In this case, referring to the definition of COGS, it can be understood that the cost of goods per picis is not the selling price in a product.

So Abi is a cost or expense that is borne by the producer of the producer of a good. Meanwhile, the selling price is the price set by the producer which will later be borne by consumers or buyers who buy goods.

The components determining the COGS

In a trading company there are 3 components that determine COGS, there are several things that can determine the following:

1. Initial inventory of goods

Initial inventory of this item is the initial war president in the current financial year period. This is the first point that can determine COGS in a trading company.

In this case the balance of the beginning inventory of merchandise can be found by simply looking at a trial balance for the current period at the beginning of the company or the balance sheet for the previous year.

2. Ending inventory of merchandise

in the ending inventory of merchandise are goods inventory at the end of the period or at the end of the year. The balance of the ending inventory of merchandise as far as we can know is only looking at the adjustment data of a company at the end to its period.

3. Net purchase

net purchases are all trade purchases by a particular company, whether they are purchases made in cash or are purchases made by creditors. besides that, in net purchases as long as the things included in it, such as transportation costs for purchase of purchase returns and price discounts from purchases

Closing

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