To calculate Cost of Goods Available for Sale, what equation is used?

The correct approach to calculate Cost of Goods Available for Sale is by using the equation that sums Beginning Inventory and Purchases. This reflects a fundamental aspect of inventory accounting, where the Cost of Goods Available for Sale represents the total cost of inventory that is available to be sold during a specific period.

Beginning Inventory represents the unsold inventory from the previous period, while Purchases account for any additional inventory acquired during the current period. By adding these two figures together, you are obtaining the total inventory available before any sales are deducted.

This metric is crucial for determining the Cost of Goods Sold in subsequent calculations, as it establishes the starting point from which sales and remaining inventory can be measured. Understanding this relationship between inventory and purchases aligns with typical accounting practices and provides a clear picture of inventory flow within a business.