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Aug 22, 2012 at 12:34 PM

COGS GL Account logic in FI

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Dear Experts,

I am really in a big confusion.

Please help me to understand the logic or use of COGS account (Cost of Goods sold) in financial accounting

As per my understanding i am giving the example here:

Please see the below Normal Scenario- (not from SAP point of view)

Purchase transaction: (Qty- 10 pcs)

(Purchase A/c) Inventory 1000 Dr.

To Vendor 1000

Now i have stock of 10 quantities.

Sales Transaction: (Qty- 10 pcs)

Customer A/c - 1500/- Dr.

Revenue A/c 1500/-

In this way profit is earned of 500/-

---------------------------------------------------------------------

SAP sales Transaction:

Post goods issue

Cost of goods sold (COGS) 1500/- (Expenses)

Inventory A/c 1500/- Cr

Billing-

Customer A/c 1500/- Dr

To Revenue a/c 1500/-

In this cash no profit is earned because revenue is adjusted against exp. (COGS) with same amount.

Please help me to come out this issue

Thanks

Regards,

RKS