While preparing income statement we calculate cost of goods sold and in that we calculate cost of inventory by the formula : opening stock + purchases - closing stock My question is that if in the question we are given increase or decrease in inventory instead of opening stock and closing stock then what is the treatment and the reason behind it.
I would say that you treat the cost of raw materials as Purchases - (increase in inventory) on the basis that the increase in inventory tells you the material you bought but didnt use.
