1. INVENTORY and COST of GOODS SOLD

2. Types of Inventory MERCHANDISING MANUFACTURING Wholesalers
Buy from manufacturers
sell to retailer
Retailers
Buy from wholesalers
Sell to general public
MANUFACTURING
Buy from several suppliers to make a product
Sell to wholesalers and sometimes retailers

3. Cost of Goods Sold (COGS)
Cost of Goods Sold is an accounting term to describe the direct expenses related to producing a good or service.
COGS measures the “direct cost” incurred in the production of any goods or services.
COGS is often the second line item appearing on the income statement, coming right after sales revenue. COGS is deducted from revenue to find gross profit.

4. Gross Profit Sales -Sales Return and Allowances =Net Sales
-Cost of Goods Sold
=Gross Profit

5. Return Inwards
Return inwards refer to the goods returned to an organization by its customers.
They are goods which were sold, but usually, because of being unsatisfactory, were returned back by our customers.
Return Inwards are also called the Sales returns. Sales return reduce total sales of a company

6. Cost of Goods Sold Beginning Inventory + Purchases + Carriage Inwards
- Return Outwards
- Ending Inventory
= Cost of Goods Sold

7. The Beginning Inventory
Beginning inventory is the recorded cost of inventory in a company's accounting records at the start of an accounting period.
for the year is the inventory left over from the previous year, that is, the merchandise that was not sold in the previous year.

8. Purchases
A temporary account used in the periodic inventory system to record the purchases of merchandise for resale. 
Any additional productions or purchases made by a retail company are added to the beginning inventory.

9. Carriage Inwards
Refers to the transportation costs associated with the purchase of merchandise or other assets.
The buyer is responsible for the cost of carriage inwards

10. Return outwards
Faulty or wrong goods that the business returns back to suppliers
Return Outwards are goods which were purchased from suppliers, however, because of being unsatisfactory or a different reason were returned back to the suppliers (faulty, broken, unsatisfactory product)

11. Ending Inventory (Closing Inventory)
At the end of the year, the products that were not sold are subtracted from the sum of beginning inventory and additional purchases.

12. Carriage Outwards
Carriage outwards refers to the seller's cost of delivering goods to the buyer.
Carriage outwards is the expense of the seller

13. Question 1
From the following data, prepare and income statement for the year ended 31 November 2017
Return Inwards
60,000
Return Outwards
500,000
Equipment
30,000
Carriage Outwards
1,000,000
Sales Revenue
5,000,000
Carriage Inwards
250,000
Closing Inventory
35,000
Cash
57,000
Opening Inventory
100,000
Fuel Expense
25,000
Purchases
2,000,000
Salary Expense
200,000
Utility Expense
Service Revenue

14. Question 2
From the following data, prepare and income statement for the year ended 31 December 2017
Return Inwards
100,000
Return Outwards
10,000
Motor Van
20,000
Carriage Outwards
50,000
Sales Revenue
12,000,000
Carriage Inwards
Closing Inventory
3,000
Cash
45,000
Opening Inventory
5,000
Lighting and Heating
40,000
Purchases
300,000
Salary Expense
120,000
Utility Expense
Rent Expense