COST OF GOODS SOLD AND A MANUFACTURER'S INCOME STATEMENT

The income statement and its statement of cost of goods manufactured. The total amount of the cost of goods manufactured during the period is carried over to the income statement, where it is used to compute the cost of goods sold. The beginning balance of the Finished Goods Inventory account is added to the cost of goods manufactured to arrive at the total cost of goods available for sale during the period. The cost of goods sold is then computed by subtracting the ending balance in Finished Goods Inventory (what was not sold) from the total cost of goods available for sale (what was available for sale). The cost of goods sold is considered an expense in the period in which the goods are sold.