Stupid accounting question: about COGS

[z0mb13]

Is depreciation expense of equipments (assembly equipments to produce products) counted in COGS to calculate gross margin?

IIRC the answer is yes, someone pls confirm.

Thanks!

 

[Cattlegod]

I'm pretty sure it is.

 

[KentState]

Is this according to a college text book type question because I've seen COGS mean many different things depending on the organization.

 

[AccruedExpenditure]

Yep

 

[z0mb13]

Originally posted by: KentState
Is this according to a college text book type question because I've seen COGS mean many different things depending on the organization.

well not really this i just for my general understanding.

basically I am looking at the fin statement of a company that produces and sell products.

 

[mizzou]

Why wouldn't it?

That's always the question to ask =)

 

[onlyCOpunk]

Depreciation is shown as an expense on the income statement.

Revenue less COGS equals Gross Profit/Margin.

GP less expenses (this is where depreciation expense goes)= net profit before tax

NPBT less taxes = net profit which then gets added to retained earnings.

COGS only deals with inventory, not fixed assets. Inventory never gets depreciated.

Dr Depreciation Expense
Cr Accumulated Depreciation

There's no COGS involved with depreciation.

 

[Riceninja]

main rule is yes

 

[z0mb13]

Thanks all! Duh I shoud've known that already

 

[onlyCOpunk]

Wait so are you guys saying that depreciation expense IS included in Cost of Goods Sold and therefore used to find GP? Because It clearly is not!

 

[z0mb13]

Originally posted by: onlyCOpunk
Depreciation is shown as an expense on the income statement.

Revenue less COGS equals Gross Profit/Margin.

GP less expenses (this is where depreciation expense goes)= net profit before tax

NPBT less taxes = net profit which then gets added to retained earnings.

COGS only deals with inventory, not fixed assets. Inventory never gets depreciated.

Dr Depreciation Expense
Cr Accumulated Depreciation

There's no COGS involved with depreciation.

?? now I am confused.

So you are saying COGS does not have any dep expense at all??

 

[onlyCOpunk]

No COGS is completely difference then an expense.

Two completely different things.

What are you trying to do specifically?

 

[ChaoZ]

Revenue
- COGS
- Depreciation expense
- a bunch of other crap

= operating income

So, depreciation expense is not included in COGS

 

[AccruedExpenditure]

Originally posted by: onlyCOpunk
No COGS is completely difference then an expense.

Two completely different things.

What are you trying to do specifically?

It's pulled out depending on what you're doing. In an income statement it's pulled out. For Managerial Accounting it's often included
-AE

 

[z0mb13]

Originally posted by: onlyCOpunk
No COGS is completely difference then an expense.

Two completely different things.

What are you trying to do specifically?

I just want to calculate gross profit, and in doing that I want to know if dep expense for equipment that is used to produce the products is counted in COGS

say a company produces widgets, is the dep of the machines that produce the widgets included in COGS to calculate gross revenue??

gross profit = revenue - COGS

COGS = include dep exp for equipments??

 

[halik]

Originally posted by: ChaoZ
Revenue
- COGS
- Depreciation expense
- a bunch of other crap

= operating income

So, depreciation expense is not included in COGS

Winnar

I remember the depreciation expense being separate line item... in both of my mba accounting classes.

 

[andylawcc]

from what I learn in Acct 101. no, depr is not included in COGS. COGS = the value of the inventory sold WHEN IT IS MADE.

 

[onlyCOpunk]

Originally posted by: z0mb13

Originally posted by: onlyCOpunk
No COGS is completely difference then an expense.

Two completely different things.

What are you trying to do specifically?

I just want to calculate gross profit, and in doing that I want to know if dep expense for equipment that is used to produce the products is counted in COGS

say a company produces widgets, is the dep of the machines that produce the widgets included in COGS to calculate gross revenue??

gross profit = revenue - COGS

COGS = include dep exp for equipments??

No. In an income statement you would never include depreciation of the equipment used in your COGS. Never ever ever ever.

Look up the definition of your COGS, actually the name says it all. It's just the cost the company paid for the goods that they sold.

Depreciation is non cash expense. You can't count it against your COGS.

 

[halik]

Originally posted by: AccruedExpenditure

Originally posted by: onlyCOpunk
No COGS is completely difference then an expense.

Two completely different things.

What are you trying to do specifically?

It's pulled out depending on what you're doing. In an income statement it's pulled out. For Managerial Accounting it's often included
-AE

Also winnar,
for valuation purposes COGS usually include depreciation to get the true economic cost of production. You end up adding it back on to get free cash flows

 

[z0mb13]

cost of product revenue is approximately similar to COGS, right?
I am reading a fin statement, and want to figure out where the dep expense is captured.

 

[z0mb13]

Ok this is the fin statement that I am looking at

link

If you look at the cash flow, the dep expense is 69M ish. But I dont see this in the income statement...

 

[onlyCOpunk]

The depreciation in the cash flow though isn't the actual expense. To know the actual expense, it either has to be directly listed in the income statement as a depreciation expense, or you have to know the details about the assets they are depreciating, like how long they've had them, what method they are using to depreciate, etc...

Now if you are just trying to find where they would have included the depreciation expense on the income statement, it is probably captured under "general and administrative." Since there are no notes, it is hard to tell where exactly they have listed it. As in the balance sheet as well they just have PPE (net) meaning they've already included accumulated depreciation in the asset.

 

[BrunoPuntzJones]

Originally posted by: onlyCOpunk

Originally posted by: z0mb13

Originally posted by: onlyCOpunk
No COGS is completely difference then an expense.

Two completely different things.

What are you trying to do specifically?

I just want to calculate gross profit, and in doing that I want to know if dep expense for equipment that is used to produce the products is counted in COGS

say a company produces widgets, is the dep of the machines that produce the widgets included in COGS to calculate gross revenue??

gross profit = revenue - COGS

COGS = include dep exp for equipments??

No. In an income statement you would never include depreciation of the equipment used in your COGS. Never ever ever ever.

Look up the definition of your COGS, actually the name says it all. It's just the cost the company paid for the goods that they sold.

Depreciation is non cash expense. You can't count it against your COGS.

See schedule A on the 1120...COGS includes depreciation

It varies depending on what you're doing, like previously stated though. Sometimes you could include it (for income tax purposes) and not for book purposes. Most don't for book. Most don't for tax either, unless they are in production.