Cost of goods sold Tax deduction

^ u.s. system computes taxable income subtracting deductions gross income. gross income, under 26 usc 61 defined gains sale of property plus other income. gains, in turn, defined in 26 usc 1001 amount realized less adjusted basis of property sold.
^ uk system computes income chargeable tax net business profits, plus other income, adjustments. in such systems, locally recognized accepted accounting principles apply. see, e.g., ias 2, inventories.
^ examples of alternatives specific identification include first-in-first-out (fifo), average cost, , last-in-first-out (lifo). many eu countries not permit lifo.
^ among methods commonly used are: i) factory burden rate, in overhead costs assigned goods produced based on labor hours or labor dollars; ii) standard costs, in cost including overheads periodically determined each type of goods , inventory , cost of goods sold adjusted periodically variances of actual costs such standards; , iii) activity based costing, in costs assigned based on factors drive incurrence of such costs. numerous variations on these available in many systems.
^ generally, determinations depend upon overall method of accounting or overarching principles of local gaap. these include cash receipts , disbursements method, accrual methods, , deferred cost methods. under these principles there may need determine when amounts treated incurred.
^ gaap requires decline in value of unsold goods charged income when decline occurs. accomplished through lower of cost or market value inventory accounting method, or inventory reserves. systems provide differences in these determinations financial reporting , tax purposes.