 In this discussion, we will discuss the discussion question of describe the cost of goods sold calculation. So when we think about cost of goods sold, we want to know a standard cost of goods sold calculation. It's going to be seen multiple times. And we're going to use it in different formats in different ways in other areas. Note that if we know the cost of good calculation, we can use it to calculate a lot of different things. And a lot of test questions will use this basic formula and possibly not ask for cost of goods sold, but some other component and we can solve for it by using the same formula. So what we don't want is memorize a lot of different components or a lot of different formulas related to the same, to the components of the same formula, meaning if we know the cost of goods sold formula, we don't need to memorize another formula that's basically just solving for another portion of that cost of goods sold formula. So when thinking the cost of goods sold, we're going to say it starts with beginning inventory. So beginning inventory is going to be the starting point. And then we're going to have purchases. I'm just going to say purchases. This is not drawn out well. And that's going to be added together. That will give us the cost of goods available for sale. I'm going to abbreviate it like this. So and if you think about it, of course, that makes sense. We're going to say, and you can think about this is kind of like a periodic type of calculation that we're thinking about here. This is the beginning inventory. We're adding to it whatever we purchased during the time period. We're not yet thinking about what we sold. We're not taking that into account yet. And we're then going to count that you can, I think about it this way. We count the physical goods at the end and say we know what ending inventory is because we counted it. So ending inventory. And that's going to give us our cost of goods sold. So the cost of goods sold calculation, very important calculation. You're going to see it a lot. And you'll see different types of thought processes similar to it. For example, tracking supplies, we had a similar kind of calculation to this. If we're going to be tracking supplies because supplies is kind of similar to inventory in that we need to track them as we go. If we make merchandise later on, we'll talk about tracking materials in a similar way. So it and it makes sense. We're going to have to begin an inventory. Then we're going to have purchases. That's what we could have sold if we're talking about a month's time period. That's what we could have sold during that month. We had inventory at the beginning and we purchased so much. So if we sold everything that we could have had during any point in time throughout that entire month, that would be this cost of goods available for sale. And then on a periodic system, we might say, well, how do we get to cost of goods sold? And note that if you think about cost of goods sold, you might be saying, well, I would already know that on a perpetual system. We would know that because we would record it every time we make a sale. We would be recording cost of goods sold. So it should be in the system. But note that we still need to do this calculation no matter whether we are doing a perpetual system or a periodic system because it's a double check. It'll give us that double check in terms of whether or not everything is correct. So this actual calculation is similar, more similar to a periodic system. But we're going to use it in a periodic or perpetual system. It should still apply in either system. In other words, we're still going to have a physical count and take that physical count, whatever that physical count is. We'll take the cost of goods available for sale minus that physical count. And that will give us the cost of goods sold calculation. Now, the reason this is going to be so important is because, well, there's a lot of different reasons, but for test purposes questions, they could ask you anything within this formula. They can ask for any component. They might ask, they might give you purchases and Indian inventory and cost of goods sold and ask for beginning inventory. If they do that, then what you don't want to do is remember a formula that you rework this for to calculate beginning inventory. What you want to do is just say, okay, this is the unknown. I know this, this and this. How could I get back then to this, you know, using algebra? And then if they ask for purchases, they might do the same thing. They might give you the beginning inventory, not purchases. Indian inventory and cost of goods sold. We'd have to find purchases. They could do the same thing for Indian inventory, make us find Indian inventory. Any one of those, we don't want to look for a formula for beginning inventory, purchases or Indian inventory. What we want to do is use the cost of goods sold formula in order to find those calculations.