Current Cost of Sales Adjustments (COSA) - Management Duniya

Current Cost of Sales Adjustments (COSA)

Current Cost of Sales Adjustments (COSA):

Under the CCA technique cost of sales are to be calculated on the basis of cost of replacing the goods at the time they are sold. The important principle is that the current cost must be matched with current revenues. As for sales are concerned it is current revenue & out of the cost all operating expenses are current cost. But in case of inventories are certain adjustments will have to be made known as cost of sales adjustment.

COSA =  (C-O) – I_a  [ C/I_c – O/I_o]

Where

C = Historical Cost of Closing Stock

O= Historical Cost of Opening Stock

I_a = Avg. Index Number.

I_c = Index number appropriate to closing stock

I_o = Index number appropriate to opening stock.

Source: A/c Books & Notes

Tags: accounting, accounts, Adjustments, Assets, Balance sheet, Capital, closing, closing stock, COSA, Cost, Credit, creditor, Current Cost, Current Cost of Sales Adjustments (COSA), debit, debt, debtor, Expenditure, historical cost, income, index number, liabilities, Loss, of, Opening stock, Profit, Profit and Loss, revenue, sales, Stock, tax
By: Management Duniya