Accounting Standards Codification 705 (ASC 705) was released to address the more specific topic of Cost of Sales and Services. This is a very important line item on the income statement and has very specific rules as to what can be included in it. The reasoning behind this is that many financial analysts on Wall Street use this to evaluate profitability and the efficiency of a company’s operations.
Cost of sales has a specific formula which must be calculated for the entity, and this is highly dependent upon the industry. For example, how to calculate cost of goods sold for the retailer would be different than cogs for a manufacturer.
Accounting made easy, for FREE!
Access the contact form and send us your feedback, questions, etc. We are always welcome to help someone out. You can also contact us if you wish to submit your writing, cartoons, jokes, etc. and we will consider posting them to share with the world! The Facebook and LinkedIn groups are also good areas to find people interested in accounting like yourself, don’t hesitate to join as everyone of all levels are welcome to become part of the community.