Cost Of Goods Sold

Gross profit margins turn negative when the costs of production exceed total sales. This could be an indication of a firm’s inability to control costs. On the other hand, negative margins could be the natural consequence of industry-wide or macroeconomic difficulties beyond the control of company’s management.

Instead of increasing sales revenue, the hike turns off consumers and sales slump to $350,000. This is typically a debit to the purchases account and a credit to the accounts payable account. At the end of the reporting period, the balance in the purchases account is shifted over to the inventory account… Read more »