![operating expense vs cogs operating expense vs cogs](https://online-accounting.net/wp-content/uploads/2020/10/image-cICqXM48djVQnZml.png)
This cost, which the company adds back later, will be included in the “Purchases of Stock in Trade” line item. The company will add this cost when they manage to sell these extra products sometime in future. To give a sense of proportion (in terms of sales and sales costs), the company deducts the cost incurred in manufacturing the extra goods from the current year costs. This stands at (Rs.29.2) Crs for the FY14.Ī negative number indicates that the company produced more batteries in the FY14 than it managed to sell. I will give you more clarity on this line item shortly.Ĭhange in the inventory of finished goods refers to the costs of manufacturing incurred by the company in the past, but the goods manufactured in the past were sold in the present/current financial year. Purchases of stock in the trade refer to all the purchases of finished goods that the company buys towards conducting its business. Both these line items are associated with the same note (Note 20). The next two line items talk about ‘Purchases of Stock in Trade’ and ‘Change in Inventories of finished goods, work-in-process & stock-in-trade’. The company uses lead, lead alloys, separators and other items, all of which adds up to Rs.2101 Crs. Note number 19 gives the associated details for this expense let us inspect the same.Īs you can see, note 19 gives us the details of the material consumed. This expense stands at Rs.2101 Crs for the FY14 and Rs.1760 Crs for the FY13. As you can see, the cost of raw material consumed/raw material is the company’s largest expense. The first line item on the expense side is ‘Cost of materials consumed’ this is invariably the raw material cost that the company requires to manufacture finished goods. As you can see in the extract below, almost all the line items have a note associated with it.
![operating expense vs cogs operating expense vs cogs](https://marqueegroup.ca/wp-content/uploads/2019/05/Lease-2-1024x527.png)
An analysis of the expenses must be shown in the Profit and Loss statement or the notes. Expenses are generally classified according to their function, which is also called the cost of sales method or based on the expense’s nature. Moving further on the P&L statement, in this chapter, we will look at the expense side of the Profit and Loss Statement along with the associated notes. In the previous chapter, we had learnt about the revenues a company generates.