The correct answer is: B. cost of goods sold
Opening stock plus purchases minus closing stock is called cost of goods sold. It is the total cost of the goods that a company has sold during a period. It is calculated by adding the cost of the goods that were on hand at the beginning of the period (opening stock) to the cost of the goods that were purchased during the period (purchases), and then subtracting the cost of the goods that were on hand at the end of the period (closing stock).
Cost of goods sold is an important figure in financial statements because it is used to calculate gross profit. Gross profit is calculated by subtracting cost of goods sold from sales revenue. It is a measure of a company’s profitability.
The other options are incorrect because:
- A. cost of goods purchased is the cost of the goods that a company has purchased during a period. It is calculated by adding the cost of the goods that were on hand at the beginning of the period (opening stock) to the cost of the goods that were purchased during the period (purchases).
- C. cost of goods in hand is the cost of the goods that a company has on hand at a particular point in time. It is calculated by adding the cost of the goods that were on hand at the beginning of the period (opening stock) to the cost of the goods that were purchased during the period (purchases), and then subtracting the cost of the goods that were sold during the period (cost of goods sold).
- D. cost of goods produced is the cost of the goods that a company has produced during a period. It is calculated by adding the cost of the materials that were used in production to the cost of the labor that was used in production, and then adding any other costs that were incurred in production.