# Current Cost of Sales Adjustment (COSA)

### Reviewed by Subject Matter Experts

Updated on March 21, 2023

## Definition

In current cost accounting (CCA), the cost of sales is calculated based on the cost of replacing the goods at the time they are sold.

The important principle is that current costs must be matched with current revenues.

Sales are current revenues and, out of the costs, all operating expenses are current costs. In the case of inventories, certain adjustments must be made, which is referred to as the Cost of Sales Adjustment (COSA).

## Cost of Sales Adjustment Formula

COSA can be calculated using the following formula:

where

• C = Historical cost of closing stock
• O = Historical cost of opening stock
• Ic = Index number appropriate to closing stock
• Io = Index number appropriate to opening stock

### Example

Calculate the cost of sales adjustment (COSA) using the following information:

 Historical Cost Index Number \$ \$ Opening Stock 52,000 100 Purchases 220,000 110 (Average) Total Goods 272,000 Less: Closing Stock 72,000 120 Cost of Sales 200,000

### Solution

To solve this, start with the COSA formula mentioned above and substitute in the correct values from the table above. In particular:

COSA = (72,000 - 52,000) - 110 (72,000 / 120 - 52,000 / 120)

= 20,000 - 110 (600 - 520)

= 20,000 - 8,800

=\$11,200

Another approach is to calculate COSA as follows:

COSA = Current cost of sales - Historical cost of sales

= 2,11,200 - 2,00,000

= \$11,200