I’d like to understand accounting more, but I’m having really a hard time with that and I’m lacking basic knowledge.
Could you please what’s the difference between cost of sales and total cost method? Also – does TCM just include more types of postings, and so everything that’s included in Cost of Sales method should also be included in TCM but not the other way around?
In: 7
Imagine you’re running a frozen banana stand. Also imagine your last name is Bluth.
Cost of sales would be things like:
* The cost of bananas
* The cost of the chocolate
* The cost of those nasty wooden sticks used for holding the bananas
* Wages for ~~Mr. Manager~~ employees
TCM includes everything in CoS, but also adds in things like:
* The purchase cost of the freezer for the bananas
* The monthly cost of electricity to run the freezer/lights/cash register
* The cost of the disposable gloves the employees wear and toss
* Advertising costs
* Rent
* Insurance (Note: Do not throw the check into the ocean.)
* Food licenses/permits
Basically, CoS is includes only the *direct* costs of producing and selling the frozen bananas, but TCM includes all of the *indirect* costs as well.
Note: This does not take into consideration the axiom that “There is money in the banana stand”, so take that into account.
Imagine you’re running a frozen banana stand. Also imagine your last name is Bluth.
Cost of sales would be things like:
* The cost of bananas
* The cost of the chocolate
* The cost of those nasty wooden sticks used for holding the bananas
* Wages for ~~Mr. Manager~~ employees
TCM includes everything in CoS, but also adds in things like:
* The purchase cost of the freezer for the bananas
* The monthly cost of electricity to run the freezer/lights/cash register
* The cost of the disposable gloves the employees wear and toss
* Advertising costs
* Rent
* Insurance (Note: Do not throw the check into the ocean.)
* Food licenses/permits
Basically, CoS is includes only the *direct* costs of producing and selling the frozen bananas, but TCM includes all of the *indirect* costs as well.
Note: This does not take into consideration the axiom that “There is money in the banana stand”, so take that into account.
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