Which formula correctly computes cost of goods sold using inventory changes?

Which formula correctly computes cost of goods sold using inventory changes?

• A. Beginning Inventory + Purchases - Ending Inventory
• B. Beginning Inventory - Purchases + Ending Inventory
• C. Ending Inventory - Beginning Inventory + Purchases
• D. Purchases - Beginning Inventory

Answer: (A)

Cost of goods sold from inventory changes is found by taking the goods available for sale and removing what remains unsold at the end of the period. Goods available for sale come from starting inventory plus what you purchased. So COGS = Beginning Inventory + Purchases − Ending Inventory. This gives the amount of inventory that was actually sold during the period: you start with what you had, add what you bought, and the portion that is not left at period end (the ending inventory) is what was used to generate sales. It’s the standard approach in the periodic inventory framework. Other expressions misplace signs or omit a key piece. Subtracting purchases or adding ending inventory ignores part of what was available or overcounts what’s left, leading to a wrong COGS figure.

Cost of goods sold from inventory changes is found by taking the goods available for sale and removing what remains unsold at the end of the period. Goods available for sale come from starting inventory plus what you purchased. So COGS = Beginning Inventory + Purchases − Ending Inventory.

This gives the amount of inventory that was actually sold during the period: you start with what you had, add what you bought, and the portion that is not left at period end (the ending inventory) is what was used to generate sales. It’s the standard approach in the periodic inventory framework.

Other expressions misplace signs or omit a key piece. Subtracting purchases or adding ending inventory ignores part of what was available or overcounts what’s left, leading to a wrong COGS figure.