Recording of goods purchases as cost of goods sold

This method of recording goods purchases is characterized in that the purchases are recorded as a total goods expense.

A comprehensive recording of purchases as goods expense is only accounting-correct if it can be assumed that the items are sold again in the same business period. The stock levels are not visible in the accounting records since the inventory account is not used.

Sales are not recorded individually, but they are recorded at the end of a workday based on the cash register tape, for example. Nothing more needs to be recorded in the goods expense account, as this already happened at the time of purchase. The journal entry reads:

• Liquid assets/Goods revenue (total sales value)

During the inventory at the end of the year, the stock of goods must be determined. Differences must be corrected by the following entries:

• Inventory/Goods expense (stock increase)
• Goods expense/Inventory (stock decrease)

As mentioned in an earlier blog post, the advantage of this method is that the number of bookings and thus the workload are reduced.