Cost of goods available for sale
Cost of goods available for sale is opening inventory plus net purchases — the total cost pool that ends the period either sold (cost of goods sold) or still on hand (closing inventory).
See it move
Opening inventory of €15,000 plus net purchases of €59,000 — €62,000 of purchases less €3,000 of purchase returns — gives a cost of goods available for sale of €74,000. That pool is not yet an expense; it still has to be split between what was sold and what remains in inventory at the period end.
The formula
Variables
- Cost of goods available for sale (€)
- Opening inventory (€)
- Net purchases (purchases less returns and allowances) (€)
The total cost pool for the period, before it is split between cost of goods sold and closing inventory.
Check yourself
A business has opening inventory of €22,000. During the period it makes purchases of €80,000 and returns €5,000 of faulty goods to its supplier. What is the cost of goods available for sale?