Impact of COGS on the Balance Sheet
You recorded $20 worth of paper cups and lemons under inventories. These inventories were fully used up during the year (recall that the company also recorded $20 in COGS during the year), so inventories decreased by $20 to $0. Retained earnings were therefore reduced by $20.
| Debits | Credits | |
|---|---|---|
| COGS (SE): | $20 | |
| Inventories (A): | $20 |
Get Crash Course in Accounting and Financial Statement Analysis, Second Edition now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
