If you bought a widget last quarter, it is in inventory (as "Materials") until it becomes incorporated in "Goods" (your product) and then that is charged to COGS for the quarter in which you assembled that widget, if you did not ship it yet, the whole "goods" (widget included with its overhead and assembly or modification costs) is carried as inventory. Inventories consists of "Materials, "Work in Progress" and "Finished Goods", all "value added" (except gross margins) is charged to COGS and until shipped credited to inventories, on shipment, you debit inventories and credit "Revenues" (with of course, the gross margins, that is how profits are generated <g>), no change to COGS since it is already counted. I hope it is clear, it took this physicist some time to understand the arcane language of accounting, but I think I got it.
Zeev |
