"1. Cost of Sales - also known as Cost of Goods Sold, it represents the value of the items sold to customers before any markup. In merchandising companies, cost of sales is usually the purchase price of the goods sold, including incidental expenses. In manufacturing businesses, it is the total production cost of the units sold. Service companies do not have the cost of sales.
Purchases - the cost of merchandise acquired that are to be sold in the ordinary course of business. At the end of the period, this account is closed to Cost of Sales.
Freight in - If the business shoulders the cost of transporting the goods it purchased, such value is recorded as Freight-in. This account is also closed to Cost of Sales at the end of the period.
2. Advertising Expense - costs of promoting the business such as those incurred in newspaper publications, television and radio broadcasts, billboards, flyers, etc."
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