Debit or Credit

jennyadele · #1 Mar 9, 2008, 09:30 PM

Hi

if using the perpetual inventory system what is the impact of COGS if the company sells inventory?
I think it would be a credit but I get really confused re debits/credits

Thanks for your help.

MaggieMouse · Mar 12, 2008, 05:40 PM

You can think of COGS as an expense. Inventory is an asset account, just like cash. When you sell inventory, you increase the cost of goods sold and decrease inventory, just like you paid the phone bill, increase expense and decrease cash.



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