Question

In a firm, opening stock plus purchases minus closing stock is called ________________.

• A. Cost of goods purchased
• B. Cost of goods sold
• C. Cost of goods in hand
• D. Cost of goods produced

Answer 1

The correct option is B Cost of goods sold

Closing stock is the amount of inventory that a business still has on hand at the end of a reporting period. This includes Raw material, work in process, and finished goods inventory. The amount of closing stock can be ascertained with a physical count of the inventory. It can also be determined by using a perceptual inventory system and cycle counting to continually adjust inventory records to arrive at ending balances.

The amount of closing stock (properly valued) is used to arrive at the cost of goods sold in a periodic inventory system with the following calculation:

Opening stock + Purchases - Closing stock = Cost of goods sold