CA Foundation Exam > CA Foundation Questions > Sales are equal toa)Cost of goods sold &ndash...
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Sales are equal to
- a)Cost of goods sold – Gross profit.
- b)Cost of goods sold + Gross profit.
- c)Gross profit – Cost of goods sold.
- d)Cost of goods sold + Net profit.
Correct answer is option 'B'. Can you explain this answer?
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Sales are equal toa)Cost of goods sold – Gross profit.b)Cost of ...
Sales and Cost of Goods Sold
Definition: Sales refer to the amount of money earned by a company or an organization by selling its goods or services. On the other hand, Cost of Goods Sold (COGS) refers to the cost incurred by a company to produce or purchase the products that are sold.
Relationship: Sales and COGS are interrelated because the latter is a key component in determining the gross profit of a company. Gross profit refers to the amount of revenue that is left over after deducting the COGS from the total revenue earned from sales.
Formula: The relationship between sales and COGS can be expressed through the following formula:
Sales = COGS + Gross Profit
Option B: Cost of goods sold Gross profit.
Explanation: Option B is the correct answer because sales are equal to the sum of COGS and gross profit. This means that when a company calculates its sales revenue, it must take into account the cost of goods sold as well as the gross profit.
Example: For instance, if a company sells products worth $100,000 and the cost of goods sold is $60,000, then the gross profit would be $40,000. Therefore, the sales revenue for the company would be $100,000.
Conclusion: In conclusion, sales and COGS are two essential components in determining the financial health of a company. While sales represent the revenue earned from selling goods and services, COGS represents the cost incurred in producing or purchasing the products sold. Therefore, it is important for a company to keep track of both its sales and COGS to ensure that it maintains a healthy gross profit margin.
Definition: Sales refer to the amount of money earned by a company or an organization by selling its goods or services. On the other hand, Cost of Goods Sold (COGS) refers to the cost incurred by a company to produce or purchase the products that are sold.
Relationship: Sales and COGS are interrelated because the latter is a key component in determining the gross profit of a company. Gross profit refers to the amount of revenue that is left over after deducting the COGS from the total revenue earned from sales.
Formula: The relationship between sales and COGS can be expressed through the following formula:
Sales = COGS + Gross Profit
Option B: Cost of goods sold Gross profit.
Explanation: Option B is the correct answer because sales are equal to the sum of COGS and gross profit. This means that when a company calculates its sales revenue, it must take into account the cost of goods sold as well as the gross profit.
Example: For instance, if a company sells products worth $100,000 and the cost of goods sold is $60,000, then the gross profit would be $40,000. Therefore, the sales revenue for the company would be $100,000.
Conclusion: In conclusion, sales and COGS are two essential components in determining the financial health of a company. While sales represent the revenue earned from selling goods and services, COGS represents the cost incurred in producing or purchasing the products sold. Therefore, it is important for a company to keep track of both its sales and COGS to ensure that it maintains a healthy gross profit margin.
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Sales are equal toa)Cost of goods sold – Gross profit.b)Cost of ...
Cost of good sold = sale or revenue from operation-gross profit
so,
sale= cost of good sold +gross profit
right answers is b
so,
sale= cost of good sold +gross profit
right answers is b
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Sales are equal toa)Cost of goods sold – Gross profit.b)Cost of goods sold + Gross profit.c)Gross profit – Cost of goods sold.d)Cost of goods sold + Net profit.Correct answer is option 'B'. Can you explain this answer?
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