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    Weli1238's Avatar
    Weli1238 Posts: 1, Reputation: 1
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    #1

    May 21, 2017, 09:40 PM
    Recording Late Cost to COGS
    Hi

    I have a scenario of manufacturing company makes product and sells to customer, yet most of the purchased raw materials and production activities are counted as part of COGS when the product is sold.


    During Product Delivery to customer we have generated the below accounting entry
    DR. COGS
    CR. Inventory

    However, the COGS is not really reflecting the actual cost we spent in producing this product. Due to the nature of the business new Vendor Invoices come very late and way after the time we made the delivery (and the above Accounting Entry), and sometimes even after the year is closed (Rarely).

    My questions is how can we record these late expenses to COGS especially after the period when the revenue recognized.

    Thank you.
    paraclete's Avatar
    paraclete Posts: 2,706, Reputation: 173
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    #2

    May 21, 2017, 11:07 PM
    Apparently you are unaware of accrual accounting, the usual method used to bring outstanding costs and revenues to account at balance date, and standard cost accounting which is used to determine product costs and so calculate costs and profits in an ongoing manner.

    Such methodologies are usually employed by accounting entities in determining the entries to be made in the accounts to permit the accurate determination of profits
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