I was contracted to do an internal audit on a multinational company, however their accounts on this side of the sea is a total mess. It has me questioning everything fundemental principle I know. So I need some support with respect to confirming my ideas or correction where needed.
Now the company has subledgers of expenses such as repairs and maintenance, personel expenses, vehicle expenses etc attached to the Cost of Goods Sold Ledger.
Now to my understanding, COGS deal mainly with stock. Opening stock plus purchases less closing stock equals COGS.
Could someone tell me if the company's COGS is correct and explain why.
I would say that part of your COGS should included direct costs. Direct costs are things with are directly concerned with the product (not repairs and maintenance, vehicles expenses) obviously it depends on what the company does as direct costs are more allied to manufacturing where the bits are purchased and then put together and it is the expenses involved with this "putting together" which is a direct cost.
