Cost of Goods Sold
Nearly all income tax systems allow a deduction for cost of goods sold. This may be considered an expense, a reduction of gross income, or merely a component utilized in computing net profits. The manner in which cost of goods sold is determined has several inherent complexities, including various accounting methods. These include:
- Conventions for assigning costs to particular goods sold where specific identification is infeasible.
- Methods for attributing common costs, such as factory burden, to particular goods.
- Methods for determining when costs are recognized in computing cost of goods sold or to be sold.
- Methods for recognizing costs of goods that will not be sold or have declined in value.
Read more about this topic: Tax Deduction, Business Expenses
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