COGS Part 2

Quick reference

• 00:05 Let's continue what we started last time.
• 00:08 Looking at costs of goods sold, and
• 00:10 getting it to balance in the balance sheet.
• 00:13 So last time out, I blasted through the actual modeling,
• 00:17 to show you just how important and useful a consistency is.
• 00:20 Because I could just copy a section down.
• 00:23 And this makes much so easy, and it also acts as a self-review.
• 00:28 I'm checking it as I go, cuz if there's an error in logic when I copy it down,
• 00:31 there's a good chance I might spot it.
• 00:34 So I ended up with that control account, which I have my opening payables, my cogs,
• 00:38 my cash payments, and my closing payables.
• 00:40 Let's go through it, cuz again, we need to put this in the financial statement,
• 00:45 so we can move on to the next one.
• 00:47 So how many lines are there in the control account?
• 00:50 Answer, four.
• 00:52 We subtract one off and that's how many calculations we need to do in
• 00:56 order to get the balance sheet to balance.
• 00:58 Because the opening payables is just the previous period's closing payables.
• 01:02 When we do the closing payables,
• 01:04 we'll do it for both periods, which is why it's always one less.
• 01:07 What's the order we do it in?
• 01:09 Well we'll calculate the cogs first of all, and put it into the income statement,
• 01:12 because it's the key driver.
• 01:14 We'll then put through the cash payments, into the cashflow statement.
• 01:18 And the closing payables will then go to the balance sheet.
• 01:21 Now, both receivables and payables are positive numbers on the balance sheet.
• 01:24 Because everything's positive on the balance sheet.
• 01:27 But do be aware, that cost of goods sold, when we go to the income statement,
• 01:31 is an expense, and therefore needs to be deducted.
• 01:34 So we'll have to negate, it when we put it in there.
• 01:37 And that will be our first line.
• 01:38 So we've got to start off there with here, row 62.
• 01:42 So let's go to the income statement, then.
• 01:46 Put this in, remember, equals minus.
• 01:49 Link back to the calculations, here's my cost of goods sold.
• 01:54 Press Enter, copy it across,
• 01:56 and as soon as I do that, the error check says, no, it's not working.
• 02:01 Cuz on the balance sheet, I'm now out of kilter from period two onwards.
• 02:06 My balance check is not working, in fact, it's out of kilter from period one.
• 02:10 I'm going dyslexic here,
• 02:12 because I thought 1,500 was 1,050, but the error check showed me.
• 02:15 And this is good.
• 02:16 I've made a genuine mistake there, and I'm being honest.
• 02:19 Because the error check told me there was an error.
• 02:22 That's why I had to look at it for the second time for.
• 02:26 Yeah, 1,050 isn't 1,500.
• 02:26 And that's what happens, tired eyes miss these things, so
• 02:30 I'm not gonna edit this out.
• 02:31 We'll say, yeah, I missed that, but Excel didn't.
• 02:34 But I've still got two calculations to go.
• 02:37 So the next one's the cashflow statement,
• 02:38 it's a direct cash payment, cost of goods sold.
• 02:41 This is already negative, so I just need to link it in,
• 02:44 so back to the calculations.
• 02:46 And now we kiss the 339, copy that across Still doesn't work.
• 02:52 This is what would freak some people out.
• 02:53 Because they think they do one thing to another, it should balance, but
• 02:56 it doesn't.
• 02:57 But now, we go to the balance sheet.
• 02:59 And we put in our accounts payable, here, in row 28.
• 03:03 Equals, and
• 03:04 you think about if, if you ever have to put a balance sheet together yourself.
• 03:08 You'll often be doing cumulative summations, and we don't have to.
• 03:11 Because the control accounts is a cumulative summation.
• 03:14 So we just need to go back to our calculations here, and link to that.
• 03:18 Because this is the one I'm talking about.
• 03:20 Do that, copy it across, and the error check's all happy again.
• 03:25 And we can see that, now, 1,050 is indeed 1,050, and I'm not going mad.
• 03:31 It all balances, everything fine.
• 03:33 I should hit Save before I mess it all up,
• 03:37 because I can now move on toward whatever's next.
• 03:40 Now, whatever is next?

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