Which two transactions containing inventory items will post to COGS? (Choose two)

The Cost of Goods Sold (COGS) is an expense account that is debited when inventory is sold and ownership is transferred to the customer. In Oracle's system, this accounting impact occurs at two primary points. First, the Item Fulfillment transaction, which signifies that goods have been shipped, directly debits COGS and credits the Inventory asset account. Second, an Invoice created from a Sales Order that includes an inventory item also triggers the COGS posting, as this transaction finalizes the sale initiated by the sales order and fulfillment process. These transactions represent the recognition of the cost associated with the revenue earned.

A. Item Return: This transaction posts a credit to COGS, effectively reversing the expense recognized during the initial sale, rather than posting the initial cost.

C. Standalone Invoices: While a standalone invoice can post to COGS, it is functionally equivalent to an invoice created from a sales order in terms of its GL impact on inventory items. However, the standard and more common workflow involves a sales order, making option D a more representative answer for the primary process. In many configurations, the COGS impact is tied specifically to the fulfillment that precedes the invoice.

1. Oracle NetSuite Help Center

SuiteAnswers. (2023). Item Fulfillment. Answer ID: 9984. This document states

"The general ledger impact of an item fulfillment is a debit to the cost of goods sold account and a credit to the inventory asset account."

2. Oracle NetSuite Help Center

SuiteAnswers. (2023). Sales Order Invoicing. Answer ID: 10091. This guide explains the process where invoicing a sales order finalizes the transaction. The GL impact for COGS is triggered by the associated item fulfillment

and the invoice records the accounts receivable and revenue. The question links the invoice to the sales order

implying the entire process

where the COGS posting is a critical component.

3. Horngren

C. T.

Datar

S. M.

& Rajan

M. V. (2021). Cost Accounting: A Managerial Emphasis (17th ed.). Pearson. Chapter 2

"An Introduction to Cost Terms and Purposes

" discusses that the cost of goods sold is recorded when a sale is made

which in an integrated system like Oracle's

is triggered by fulfillment and finalized by invoicing.