Cost of Goods

I’ve got the information you need on why the Cost of Goods Sold (COGS) showed different amounts than your actual invoices, @gstradinginc.

COGS includes all of the costs and expenses directly related to the production of goods. And excludes indirect costs such as overhead and marketing.

Therefore, COGS is calculated by adding the beginning inventory and any further purchases made during the year and then subtracting closing inventory from the sum of opening inventory and additional purchases. This is the reason why the COGS figure is displayed differently than your actual invoices amounts.

You can read this article to learn more about COGS and how QuickBooks handle this matter for you: How to calculate and record COGS.

Additionally, here’s a reference that covers information about reports in QuickBooks Desktop: Understand reports. Also contains instructions on how to customize and memorize them.

Don’t hesitate to add a comment if you have more questions or concerns about COGS. I’ll be here to help. Take care always!

@gstradinginc  RE: For example, we have an invoice that is $3,088.11, but in the COGS it shows as $5,728,307.44. What is causing this and how do we fix it? 

This means that QuickBooks thinks the cost of the things you sold for $3k was over $5m. There can be two reasons for this:

1) Your data, as entered,  substantiates that number. You might have made a mistake on a bill/purchase, for example, and entered the Qty, Rate, and Amount for the item in question incorrectly.

2) The cost history for the item is corrupted and not correctly based on your current purchase/sale transactions for the item.

To check the first case, run an Inventory Valuation Detail report. (Reports | Inventory | Inventory Valuation Detail). Change the dates to All. Optionally filter the report for the item in question. Note the report includes, on a running basis, the Average Cost as calculated by QuickBooks. It will fluctuate with each new purchase of the item whenever the item price changes. You may be able to locate a data-entry error using this detailed history. If you do, edit the purchase and fix the Qty and Rate so that it's correct.

To check for the second case, Verify your data file (File | Utilities | Verify Data). If you see errors that are related inventory costing or valuation in the results, then Rebuild (repair) the company file (File | Utilities | Rebuild Data), which will re-calculate the average cost history based on the actual transactions currently in the company file.