There are different ways you can keep track of your inventory to do the correct calculation of Cost of Good Sold. The basis formula for calculating COGS is :
Beginning inventory
+ Purchased made during the year
- Ending inventory.
= Cost of Goods Sold.
The Beginnig inventory should always match the ending inventory from prior year. For tracking the inventory you can use any of the following methods:
1. Excel/Google Sheets: You can keep track of purchases made and items sold on excel and google sheets and that can calculate for you the ending inventory. This method can become difficult in real-time and can be time consuming.
2. Use pen and paper: You can track your inventory with this method if you have simple inventory needs, but this method can also become time-consuming and you have to be very careful to avoid mistakes.
3. Using Software / apps: Their are variety of softwares/apps available to keep track of your inventory, if you become used to it over time, it becomes very easy for you to keep track of your inventory. Downside, is this can be an expensive method.
Once you have your purchases and ending inventory with any of the above methods, you can calculate your cost of good sold with the above formula. Below is the link with different inventory management apps. If you like my response, please give me a thumbs up 🙂
https://quickbooks.intuit.com/app/apps/category/inventory/en-us/
