# Current Cost of Sales Adjustment (COSA)

Written by True Tamplin, BSc, CEPF®
Updated on June 22, 2021

## Definition

The CCA technique, cost of sales are to be calculated on the basis of 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. Sale is current revenue and out of the costs, all operating expenses are current costs. The case of inventories, certain adjustments will have to be made, known as the cost of sales adjustment.

## Cost of Sales Adjustment (COSA) Formula

Cost of sales adjustment can be calculated with the help of the following formula:

Where,
C = Historical cost of closing stock
O = Historical cost of opening stock
Ia = Average Index number
Ic = Index number appropriate to closing stock
Io = Index number appropriate to opening stock
This has been explained in the following example.

### Example

Calculate the Cost of sales adjustment (COSA) from the following:

 Historical Cost Index Number \$ \$ Opening Stock 52,000 100 Purchases 2,20,000 110 (Average) Total goods 2,72,000 Less: Closing Stock 72,000 120 Cost of sales 2,00,000

Solution

COSA = (72,000 – 52,000) – 110 (72,000 / 120 – 52,000 / 120)
= 20,000 – 110 (600 – 520)
= 20,000 – 8,800
=\$11,200
Cost of sales adjustment can also be calculated as under:

COSA = Current cost of sales – Historical cost of sales
= 2,11,200 – 2,00,000
= \$11,200