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Cost of Sales Formula

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I am looking to confirm the correct formula to use to calculate the Cost of Sales entry in the Business income & expenses section (5.) of our 2020 Partnership Tax Return - is the correct formula to use as follows?

Cost of Sales = Value of Opening Stock + Purchases & other costs related to sale of goods - Value of Closing Stock.

e.g. If I have the following entries in the Business & Professional Items on p.8 of the 2020 Partnership Tax Return form,

39 Opening Stock = $25,000

40 Purchases and other costs = $35,000

41 Closing Stock = $31,000

Would the correct Cost of Sales entry in my Business expenses schedule be $25,000 + $35,000 - $31,000 = $29,000? 

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Hi @alies

 

It appears you have followed the steps below -

 

1. Value of all the trading stock on hand at the start of the financial year

2. Add purchases

3. Minus value of all the trading stock on hand at the end of the financial year

4. Total equals Cost of sales.

 

The purchases amount should include the cost of goods purchased and the cost of any freight, labour or services associated with acquiring the trading stock and bringing it to a state or location where it is ready for sale, exchange or manufacture

 

Ari

1 REPLY 1
Highlighted

Most helpful response

Community Support

Replies 0

Hi @alies

 

It appears you have followed the steps below -

 

1. Value of all the trading stock on hand at the start of the financial year

2. Add purchases

3. Minus value of all the trading stock on hand at the end of the financial year

4. Total equals Cost of sales.

 

The purchases amount should include the cost of goods purchased and the cost of any freight, labour or services associated with acquiring the trading stock and bringing it to a state or location where it is ready for sale, exchange or manufacture

 

Ari